New Regulations Change Withholding Requirements for Dispositions of U.S. Real Property

New Regulations Change Withholding Requirements for Dispositions of U.S. Real Property

The IRS has issued regulations pursuant to the Protecting Americans from Tax Hikes Act (“PATH”) that make changes to the income tax withholding requirements for nonresident aliens when U.S. situs property is liquidated. While foreign individuals are generally exempt from capital gains for asset sales which are not connected with a U.S. trade or business, the IRS treats U.S. real property as being connected to the U.S. and subjects such sales to withholding requirements. The regulations imposed by the IRS increase the withholding requirements thereby resulting in less funds being immediately available for sellers of U.S. real propertThe requirement to withhold funds is generally imposed on transferees and is often part of the escrow process. Prior to the imposition of the new regulations, the transferee was required to withhold 10%. For sales that take place after February 16, 2016, the withholding rate increases to 15%. (PATH Act §324(a)) While the 10% continues to apply for the sale of homes used as a residence, this exception only applies to residences that have a realized sale value of between $300,000 and $1 million. PATH Act §324(a)).

Rate this article
 
 
 
 
 
 
 
1 Rates (100 %)
Rate
 
 
 
 
 
 
1
5
5
 

Do You have any Questions?

We look forward to assisting you. For the sake of simplicity and efficiency, we request that you use our contact form for your inquiry and describe the matter as clearly as possible. In addition, you can include relevant attachments. After submitting your inquiry, we will contact you either by telephone or e-mail within one working day. If we can assist, we will suggest a time and date for an initial consultation. Of course, you can also contact this firm or a particular attorney directly to make an appointment for a personal consultation or telephone consultation (find contact details here). Please be advised that no attorney-client relationship is created by sending us an email or filling out this contact form. For information on our fees, please click here.  

Formular
captcha
Attach documents to your message to us (max 5 MB).

Upon request, we offer consultation via Zoom. For general information  how to join an instant meeting through an email invite, please visite the Zoom website

Related publications