1) the total purchase price for the property does not exceed $300,000, and
2) the buyer must has definite (and carried out) plans to reside at the residence for at least 50% of the number of days the property is in use during each of the first two 12-month periods following the date of the sale.
FIRPTA imposes U.S. tax on gains from the disposition of USRPIs by foreign corporations also
A foreign corporation that distributes a USRPI must pay a tax equal to 35% of the gain it recognizes on the distribution to its shareholders
This tax does not apply to 80% corporate owners if the foreign corporation is liquidated. It also does not apply generally in certain non-recognition transactions (e.g., a merger) if the acquired interest is also a USRPI
The normal withholding rules apply to dividend distributions of property to shareholders, i.e., 30% or a lesser treaty rate for dividends attributable to US source income, provided 25% of the corporation’s income is US source.
Additional issues if the US corporation is a U.S. Real Property Holding Company (USRPHC)
If a corporation qualifies as a U.S. real property holding corporation on any applicable determination date after June 18, 1980, any interest in it shall be treated as a U.S. real property interest for the shorter of the period of five years from that date or the period of ownership
A domestic corporation is a USRPHC if the fair market value of its USRPIs is equal to or greater than 50 percent of the fair market value of the corporation’s worldwide real property interests and all other assets used in a trade or business
Exceptions apply where the corporation sold all of its USRPIs, and another applicable to 5 percent-or-less owners of publicly traded USRPHCs
Circular 230 Disclosure: Internal Revenue Service regulations provide that, for the purpose of avoiding certain penalties under the Internal Revenue Code, taxpayers may rely only on opinions of counsel that meet specific requirements set forth in the regulations, including a requirement that such opinions contain extensive factual and legal discussion and analysis. Any tax advice that may be contained herein does not constitute an opinion that meets the requirements of the regulations. Any such tax advice therefore cannot be used, and was not intended or written to be used, for the purpose of avoiding any federal tax penalties that the Internal Revenue Service may attempt to impose.
The information contained herein is general in nature and is not intended as a substitute for specific legal advice nor is it to be relied upon for individual circumstances.