If the seller is a foreign person, what must the buyer do?

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Multiple Choice

If the seller is a foreign person, what must the buyer do?

When a seller is a foreign person, the buyer has a withholding obligation under FIRPTA. The buyer must withhold 10% of the sale price from the seller’s proceeds and remit that amount to the IRS. This withheld amount serves as an advance payment of the foreign seller’s U.S. tax on the disposition of the real property. At tax time, the seller reports the sale and the actual tax due; if the withholding exceeds the final tax, the seller can get a refund, and if it’s less, the seller may owe more. This withholding is not for the buyer’s taxes, nor is it simply a notice to the seller or a hold on the funds by escrow.

When a seller is a foreign person, the buyer has a withholding obligation under FIRPTA. The buyer must withhold 10% of the sale price from the seller’s proceeds and remit that amount to the IRS. This withheld amount serves as an advance payment of the foreign seller’s U.S. tax on the disposition of the real property. At tax time, the seller reports the sale and the actual tax due; if the withholding exceeds the final tax, the seller can get a refund, and if it’s less, the seller may owe more. This withholding is not for the buyer’s taxes, nor is it simply a notice to the seller or a hold on the funds by escrow.

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