# FIRPTA question



## Shelster (Apr 3, 2014)

Hoping someone can help with ANY of the following questions:

Husband (UK resident/citizen) lives in UK; I (US citizen) live in US - we are amicably separated. We co-own a small co-op apartment in NYC which we are in the process of selling. Selling price will be far less than $300,000, so my understanding is that the apartment purchaser will not have to withhold $$ pursuant to FIRPTA. However, I want to comply with all the requirements:

1. I understand that in order for the $300K exemption to apply, the purchaser must intend to reside in the apartment for two years following closing, and that we need an affidavit from purchaser to that effect. That's fine - but what is the affidavit for?? Does it get filed with US taxes, or is it just for our records?

2. Since the $300K exemption will apply, must we apply for a FIRPTA withholding certificate?

3. I understand a 1099-S will be submitted to the IRS as part of the closing documents. Does that mean husband needs an ITIN before closing?

4. Husband has never lived in US/made US income/filed US taxes, but I am assuming that he must file taxes next year as a result of this sale. Capital gains on this sale will only be about $15K, max. Is the capital gain exclusion available to non-resident alients?

Thank you so much in advance for any guidance on any of the above!!!!!


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## JustLurking (Mar 25, 2015)

Sorry, little or no idea on the first three, but something on this one:


Shelster said:


> 4. Husband has never lived in US/made US income/filed US taxes, but I am assuming that he must file taxes next year as a result of this sale. Capital gains on this sale will only be about $15K, max. Is the capital gain exclusion available to non-resident aliens?


Nonresident aliens don't get the usual US capital gains tax. Worse, FIRPTA treats the gains on US real estate as _income_ for nonresident aliens, so taxable at normal US graduated rates. And as a final rubbing of salt into the wound, US nonresident aliens are not eligible for the US standard deduction and most other deductions, meaning that if your husband is caught by FIRPTA, the very first dollar of this gain will be taxable to him at 10%, with rates going up from there. If there is any upside here, it is that if he has a UK tax liability on this sale, he can take a credit for the US tax.

More here: Foreign Investment in Real Property Tax Act - Wikipedia

As a general rule, US nonresidents should avoid directly holding US real estate, and instead use a holding corporation or other blocker to avoid FIRPTA. Far too late to discover that now, though. :-(

Finally, on your question 3, I don't know about _closing_ specifically, but if your husband doesn't have either a US SSN or an ITIN then he will definitely need one before he can file any FIRPTA-related US tax return.


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## Shelster (Apr 3, 2014)

JustLurking said:


> Sorry, little or no idea on the first three, but something on this one:
> 
> Nonresident aliens don't get the usual US capital gains tax. Worse, FIRPTA treats the gains on US real estate as _income_ for nonresident aliens, so taxable at normal US graduated rates. And as a final rubbing of salt into the wound, US nonresident aliens are not eligible for the US standard deduction and most other deductions, meaning that if your husband is caught by FIRPTA, the very first dollar of this gain will be taxable to him at 10%, with rates going up from there. If there is any upside here, it is that if he has a UK tax liability on this sale, he can take a credit for the US tax.
> 
> ...


Many thanks for your help!!!! 
And .... urrgh. Really wish our lawyer had advised us of this when we bought!!

One final question (hope this isn't a stupid q): the net gain on sale will be minimal (max $15K - 20K). Do you know if that gain is allocated equally between H's & W's? In other words, if our net gain is $15K, are Husband's applicable taxes as a non-resident alien only imposed on $7.5K of that gain?

Thanks again for your help!!


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