As previously noted, the Protecting Americans from Tax Hikes Act of 2015 modify the withholding provisions under FIRPTA. The Service has now issued regulations implementing the statutory changes. Key among them are:
A. The increase of the withholding rate on dispositions of US real property interests from 10% to 15%;
B. Implementation of a new reduced 10% rate of withholding when the US real property interest transferred will be used by the transferee as a residence and the amount realized for the property does not exceed $1 million;
C. Eliminating from the cleansing rule (relating to the cessation of US real property holding company status for US corporations after they have disposed of all US real property interests) corporations that are or were formerly regulated investment companies or real estate investment trusts (see new Treas. Regs. §1.897-2(f)(2)(iii));
D. Eliminating from the application of Code §897 real property interests owned directly or indirectly by qualified foreign pension funds (see new Code §897(l)); and
E. Directions to use mailing addresses provided in the Instructions for Form 8288 for various FIRPTA filings.
Posted by Pooja Shivaprasad, Associate Editor, Wealth Strategies Journal