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  • Writer's picture Treavor Dodsworth CFP®, CPA, CKA®

#112 - FIRPTA


FIRPTA: Foreign Investment in Real Property Tax Act… Never heard of it? To be honest, neither had I until this past week. As it turns out, many of the people subject to the requirements were not aware of it either. A recent audit found several hundreds of millions of dollars of noncompliance.

FIRPTA requires an income tax withholding when there is a disposition of U.S. real property by a foreign person. The transferee/buyer is usually the withholding agent. For example, if I bought a home in the U.S. from someone who was not a US citizen that lived in another country I may be required to withhold part of the transaction.

The government essentially doesn’t want outside investors to buy real property in the U.S, sell it at a gain, and never pay the tax on the gain. Therefore, they make a withholding requirement and then the seller can file the appropriate tax documents to get a refund if too much withholding was withheld.

This is a withholding, not a tax on the buyer. In other words, there should be no negative financial ramifications to the buyer when purchasing from a foreign person if the correct actions are taken. Therefore this should not dissuade you from buying from a foreign person just make sure if you think it is possible this rule applies that you do additional research. There are many exceptions.


Interesting Article(s) or Video(s)

  • Information on the FIRPTA straight from the IRS.

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  • Randy Alcorn’s post highlights that fame and impact don’t go hand in hand. It is an encouragement to be intentional with those around you.


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