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Publication 519

Tax Withheld on Real Property Sales(p42)

If you are a nonresident alien and you disposed of a U.S. real property interest before February 17, 2016, the transferee (buyer) of the property generally was required to withhold a tax equal to 10% of the amount realized on the disposition.
For dispositions of a U.S. real property interest after February 16, 2016, the rate of withholding has generally increased to 15%. However, if the property is acquired after February 16, 2016, by the buyer for use as a residence and the amount realized does not exceed $1,000,000, the rate of withholding remains at 10%.
The amount realized is the sum of:
If the property transferred was owned jointly by U.S. and foreign persons, the amount realized is allocated between the transferors based on the capital contribution of each transferor.
A distribution by a qualified investment entity to a nonresident alien shareholder that is treated as gain from the sale or exchange of a U.S. real property interest by the shareholder is subject to withholding at 35% (21% for dispositions in tax years beginning in 2018). Withholding is also required on certain distributions and other transactions by domestic or foreign corporations, partnerships, trusts, and estates. These rules are covered in Pub. 515.
For information on the tax treatment of dispositions of U.S. real property interests, see Real Property Gain or Loss in chapter 4.
If you are a partner in a domestic partnership, and the partnership disposes of a U.S. real property interest at a gain, the partnership will withhold tax on the amount of gain allocable to its foreign partners. Your share of the income and tax withheld will be reported to you on Form 8805, or Form 1042-S (in the case of a publicly traded partnership).
Withholding is not required in the following situations.
  1. The property is acquired by the buyer for use as a residence and the amount realized is not more than $300,000.
  2. The property disposed of is an interest in a domestic corporation if any class of stock of the corporation is regularly traded on an established securities market. However, this exception does not apply to certain dispositions of substantial amounts of nonpublicly traded interests in publicly traded corporations.
  3. The property disposed of is an interest in a U.S. corporation that is not regularly traded on an established market and you (the seller) give the buyer a copy of a statement issued by the corporation certifying that the interest is not a U.S. real property interest.
  4. You (the seller) give the buyer a certification stating, under penalties of perjury, that you are not a foreign person, and containing your name, U.S. taxpayer identification number, and home address. You can give the certification to a qualified substitute. The qualified substitute gives the buyer a statement, under penalties of perjury, that the certification is in the possession of the qualified substitute. For this purpose, a qualified substitute is (a) the person (including any attorney or title company) responsible for closing the transaction, other than your agent, and (b) the buyer's agent.
  5. The buyer receives a withholding certificate from the IRS.
  6. You give the buyer written notice that you are not required to recognize any gain or loss on the transfer because of a nonrecognition provision in the Internal Revenue Code or a provision in a U.S. tax treaty. The buyer must file a copy of the notice with the Ogden Service Center, P.O. Box 409101, Ogden, UT 84409. You must verify the notice as true and sign it under penalties of perjury. The notice must contain the following information.
    1. A statement that the notice is a notice of nonrecognition under Regulations section 1.1445-2(d)(2).
    2. Your name, taxpayer identification number, and home address.
    3. A statement that you are not required to recognize any gain or loss on the transfer.
    4. A brief description of the transfer.
    5. A brief summary of the law and facts supporting your claim that recognition of gain or loss is not required.
    You may not give the buyer a written notice for any of the following transfers: the sale of your main home on which you exclude gain, a like-kind exchange that does not qualify for nonrecognition treatment in its entirety, or a deferred like-kind exchange that has not been completed at the time the buyer must file Form 8288. Instead, a withholding certificate (described next) must be obtained.
  7. The amount you realize on the transfer of a U.S. real property interest is zero.
  8. The property is acquired by the United States, a U.S. state or possession, a political subdivision, or the District of Columbia.
  9. The distribution is from a domestically controlled qualified investment entity (QIE) and is treated as a distribution of a U.S. real property interest only because an interest in the entity was disposed of in an applicable wash sale transaction. For the definition of a QIE, see Qualified investment entities under Real Property Gain or Loss, earlier. See Wash sale under Real Property Gain or Loss in chapter 4.
The certifications in (3) and (4) must be disregarded by the buyer if the buyer or qualified substitute has actual knowledge, or receives notice from a seller's or buyer's agent (or substitute), that they are false. This also applies to the qualified substitute's statement under (4).

Withholding certificates.(p43)

The tax required to be withheld on a disposition can be reduced or eliminated under a withholding certificate issued by the IRS. In most cases, either you or the buyer can request a withholding certificate.
A withholding certificate can be issued due to any of the following.
  1. The IRS determines that reduced withholding is appropriate because either:
    1. The amount required to be withheld would exceed your maximum tax liability, or
    2. Withholding of the reduced amount would not jeopardize collection of the tax.
  2. All of your realized gain is exempt from U.S. tax and you have no unsatisfied withholding liability.
  3. You or the buyer enters into an agreement with the IRS for the payment of tax and provide security for the tax liability.
See Pub. 515 and Form 8288-B for information on procedures to request a withholding certificate.

Credit for tax withheld.(p43)

The buyer must report and pay over the withheld tax within 20 days after the transfer using Form 8288. This form is filed with the IRS with copies A and B of Form 8288-A. Copy B of this statement will be stamped received by the IRS and returned to you (the seller) if the statement is complete and includes your taxpayer identification number (TIN). You must file Copy B with your tax return to take credit for the tax withheld.
A stamped copy of Form 8288-A will not be provided to you if your TIN is not included on that form. The IRS will send you a letter requesting the TIN and provide instructions for how to get a TIN. When you provide the IRS with a TIN, the IRS will provide you with a stamped Copy B of Form 8288-A.