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(Created December 2016)

FIRPTA was enacted in 1980 to address perceived abuses by foreign investors, who, unlike U.S. citizens, were not required to pay capital gains taxes, to create equity of tax treatment between foreign and domestic real estate owners. Under FIRPTA, foreign real estate owners are required to withhold a portion of the amount realized, to be paid to the IRS. The recently passed PATH Act of 2015 impacted withholding rates. This field guide provides a history of FIRPTA and the changes due to the PATH Act of 2015. (A. Creitz, Web Content & Information Specialist)


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FIRPTA Flags

Photo credit: Karen Roe, flickr, 2012

FIRPTA Basics  

Webinar: Changes to the Foreign Investment in Real Property Tax Act (FIRPTA), (National Association of REALTORS®).

Foreign Investment in Real Property Tax Act (FIRPTA), (Internal Revenue Service).

FIRPTA Withholding: Withholding of Tax on Dispositions of United States Real Property Interests, (Internal Revenue Service).

Exceptions from FIRPTA Withholding, (Internal Revenue Service).

The ABCs of FIRPTA, (Commercial Observer).

Amended Rules Govern FIRPTA Dispositions, (Journal of Accountancy). E

Definitions of Terms and Procedures Unique to FIRPTA, (IRS).

PATH Act of 2015  

PATH Act: Implications for FIRPTA, REIT Spin-offs, and Bonus Depreciation, (Journal of Taxation of Investments). E

New FIRPTA Regulations Conform and Update Changes From the PATH Act, (PricewaterhouseCoopers).

FIRPTA Changes Herald Increased Real Estate Investment Funding, (National Real Estate Investor).

Six Ways the “Protecting Americans from Tax Hikes” Act Helps American Taxpayers, (Committee on Ways and Means, U.S. House of Representatives).

More Details on the “Protecting Americans From Tax Hikes Act of 2015”, (Committee on Ways and Means, U.S. House of Representatives).

The Twelve Most Important Provisions in the Latest Tax Bill, (Tax Foundation). 

11. New rules for real estate investment trusts are created (cost: $1.0 billion)

In recent years, it’s become increasingly common for companies to spin off their real estate assets into real estate investment trusts, to gain more favorable tax treatment. The PATH Act cracks down on this strategy, by imposing several limits on spinoffs involving real estate investment trusts (which are mostly similar to the ones I described last week).

Simultaneously, the PATH Act makes it easier for real estate investment trusts to attract foreign investments by relaxing some of the provisions of FIRPTA – a 1980s bill that imposed high taxes on foreign investment in U.S. real estate. Because there’s not much of a justification for the existence of FIRPTA (the law was born out of fears that foreign investors would buy up U.S. farm land), these provisions are positive changes to the tax code.

eBooks & Other Resources

Field Guides & More

These field guides and other resources in the Virtual Library may also be of interest:

Field Guide to 1031 Exchanges

Field Guide to International Referrals

Field Guide to Real Estate Investment Trusts (REITs)

Field Guide to Working With International Clients

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