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FIRPTA Transactions

Skillful Miami Lawyers Advise on FIRPTA Implications at Closings

South Florida attorneys handle sales involving foreign-owned properties

When a real estate transaction involves a foreign seller, complex tax implications may arise. Key among them is the Foreign Investment in Real Property Tax Act (FIRPTA). This law requires that the buyer withhold at least 15 percent at closing as a deposit against the seller’s tax liability, which is intended to serve as an estimate of the capital gains taxes due. However, FIRPTA still applies even when the property is sold at a loss. The seller may later obtain a full or partial refund when filing a tax return at the end of the year.

When does FIRPTA apply?

FIRPTA’s withholding requirement applies when a real estate transaction involves foreign sellers — both individuals and certain business entities. In general, when the seller is a foreign corporation, foreign trust or single-member LLC with a foreign member, FIRPTA comes into play. When an LLC is the seller of the property, whether FIRPTA applies will be determined by the residency or foreign status of its member(s), regardless of whether the LLC itself is based in Florida or another U.S. state. The law covers both residential and commercial transactions. There is a limited exception for residential property under a certain dollar threshold that will be used primarily for personal purposes.

Proven firm prepares clients for real estate withholding tax requirements

Whenever the real estate seller is a foreign individual or entity, it’s important for both parties to consult with an attorney well in advance of closing to analyze potential FIRPTA implications. Being prepared can reduce the risks of complications at closing. For example, in some cases, the amount withheld may be less than 15 percent if the seller obtains a withholding certificate from the IRS in advance of closing. For the buyer, failure to comply with the FIRPTA withholding requirements could result in substantial liability. Thus both sides have a strong financial incentive to sort out FIRPTA issues before closing. Both buyers and sellers can protect their rights by proactively dealing with FIRPTA issues well in advance of closing.

Get thorough guidance on FIRPTA from an experienced Florida real estate attorney

At the Miami law firm of Norma Echarte & Associates, we are intimately familiar with the complexities of FIRPTA. Our firm can assist you in identifying whether the law applies and how to deal with its requirements. Learn more by calling 305-501-2844 or reaching out to us online. We handle complex commercial and residential real estate transactions across South Florida.

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