Thomas C. Roberge & Company

FLOWCHART FOR HANDLING

10% FIRPTA WITHHOLDING

ON U.S. REAL ESTATE SALES

July 26, 2007

Thomas C. Roberge & Company

St. Petersburg and Sarasota

Telephone: (727) 822-9393

Contact: TRoberge@RobergeCo.com

It is often said that a picture is worth a thousand words.

With this in mind we have tried to reduce the FIRPTA withholding maze of countless statutes, regulations and other rules to a simple flowchart that summarizes the issue which foreign sellers, closing agents and real estate professionals are faced with in dealing with the sale.

There are numerous choices and issues that a foreign seller must deal with when selling U.S. real estate. Substantial tax savings can often result if these areas are fully considered and analyzed from the seller’s side. It is to the seller’s benefit to obtain competent advice from a tax professional who specializes in international tax matters. Our firm has practiced extensively in the FIRPTA area since it became law in 1985. Feel free to contact us if you have questions relating to this area.

One item of particular importance on the chart is for sales of $300,000 or less where the buyer qualifies for the exception and elects not to withhold. The seller is still obligated under U.S. tax law to file an income tax and pay any tax due to the Internal Revenue Service. The problem to the seller in this situation is that if tax is due with the tax return the seller will probably owe a penalty for underpayment of estimated tax in addition to the income tax. In other words, the seller could very well wind up owing more with the buyer relying on the exception and not withholding than if the 10% was paid to the IRS and the seller obtained a refund with the filing of his or her U.S. income tax return. You may want to instruct the buyer not to rely on the exception in this instance so that the estimated tax is paid on the seller’s behalf.

The following page is our FIRPTA withholding chart.

Internal Revenue Service Circular 230 Disclosure – You are hereby advised that any tax advice contained in this newsletter is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or to support the marketing of any tax transactions or matters addressed herein.