My Short Sale Seller is a foreigner. California requires Fed/State Tax Withholding on any sales by a foreigner. Short Sales Net zero..does anyone know if there is an exemption for Short Sales?
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NET zero? not trying to be a smart alec but 10% times zero equals zero?
Exactly!! But..Escrow is still insisting they MUST withhold 10% of the Sales price..makes NO sense to me and Short Sale Lender isn't going for it, but hard to fight the IRS!!
Find a new escrow company. I will check with my escrow company to verify if they are correct
Foreign persons are generally exempt from U.S. tax on capital gains.[5]
Under FIRPTA, however, foreign persons are subject to tax on gains from disposition of U.S. real property interests (USRPIs).
The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), enacted as Subtitle C of Title XI (the "Revenue Adjustments Act of 1980") of the Omnibus Reconciliation Act of 1980, Pub. L. No. 96-499, 94 Stat. 2599, 2682 (Dec. 5, 1980), is a United States tax law that imposes income tax on foreign persons disposing of United States real property interests. Tax is imposed at regular tax rates for the type of taxpayer on the amount of gain considered recognized. Purchasers of real property interests are required to withhold tax on payment for the property. Withholding may be reduced from the standard 10% to an amount that will cover the tax liability, upon application in advance of sale to the Internal Revenue Service. FIRPTA overrides most nonrecognition provisions as well as those remaining tax treaties that provide exemption from tax for such gains.
Right, there's a procedure for avoiding the withholding. I don't know it exactly, but it has to be done in advance, and I hear maybe 4 weeks time.
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