FIRPTA is the Foreign Investment in Real Property Act. The purpose of FIRPTA is to ensure “foreign persons” who own U.S. property pay any capital gains taxes which may be due on the sale. The government does that by requiring that all sellers file a document at closing at close of escrow stating whether or not they qualify as a “foreign person” subject to FIRPTA. If so, escrow is required to withhold 15% of the sale price and transmit that sum to the IRS. Where the 15% deduction applies, the seller will have to follow IRS procedures (by appropriate filings) to obtain a refund if all or some of the tax is not owed. Next: Avoiding the 15% Bite at COE.
