COMMON MISCONCEPTIONS

ON THE FIRPTA 10% WITHHOLDING

FOR FOREIGN SELLERS

August 13, 2007

Thomas C. Roberge & Company

St. Petersburg and Sarasota

Telephone: (727) 822-9393

This memo addresses certain misconceptions real estate professionals and foreign sellers are faced with as to whether the 10% FIRPTA withholding applies to foreign sellers.

The Foreign Seller Has a U.S. Tax Identification Number or Has Applied For One

The 10% withholding applies! You have a foreign person disposing of U.S. real estate – period – no if’s, and’s or but’s. Congress is only trying to ensure that the foreign seller files a U.S. tax return and pays the same tax a U.S. person pays if he or she sells similar property. This is the #1 misconception by realtors, closing agents and foreign sellers!

The Foreign Person is Selling at a Loss

The 10% withholding applies. You have a foreign person disposing of U.S. real estate. The fact that he or she is selling at a loss is irrelevant. The foreign seller can apply for relief or file an income tax return for a refund.

The Foreign Seller Has Been Filing U.S. Nonresident Income Tax Returns Each Year

The 10% withholding applies. You still have a foreign person disposing of U.S. real estate. The fact that he or she has been filing U.S. tax returns each year or selling at a loss is irrelevant.

1031 Exchanges

The 10% withholding applies. You still have a foreign person disposing of U.S. real estate.

You may feel that this is unfair. Maybe so. However, there are many techniques available for minimizing the impact of the 10% withholding. Our firm specializes in U.S. tax issues for foreign nationals investing and doing business in the U.S. Feel free to contact us at 727 822 9393 for more information.

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.