FIRPTA stands for which term?

• A. Foreign Investor Real Property Tax Act.
• B. Foreign Income Real Property Tax Act.
• C. Foreign Investment Real Property Tax Act.
• D. Federal Investment Real Property Tax Act.

Answer: (C)

FIRPTA stands for Foreign Investment in Real Property Tax Act. This federal law requires withholding tax on the disposition of U.S. real property interests by foreign persons, ensuring the IRS collects any tax due from the sale. In escrow practice, this matters because when a foreign seller is involved, the buyer may need to withhold a portion of the sale proceeds and file the proper forms (like IRS filings related to FIRPTA) to satisfy the withholding requirement. The option that reflects the recognized name of the statute aligns with the acronym FIRPTA, which is why it is the correct choice in the exam.