February 7, 2006

Thomas C. Roberge & Company

St. Petersburg and Sarasota

Telephone: (727) 822-9393

Recently we have received several telephone calls regarding FIRPTA withholding on real estate sales by foreign sellers where there is an allocation in the contract between the real estate and the furnishings.

A typical scenario is as follows. Jane Smith, a Canadian, has a contract to sell her condominium for $325,000. An addendum to the contract is signed by the buyer and seller allocating $295,000 to the condominium and $30,000 to furnishings. Jane and her realtor also want the buyer to sign the “Statement of Intent to Reside at Property” to avoid the FIRPTA withholding taking the position that the sale is eligible for the $300,000 exception to the 10% withholding.

The tax treatment of the above transaction is that the entire $325,000 sale price is subject to the 10% FIRPTA withholding and the buyer is not eligible for the $300,000 exception. The IRS position is that the addendum allocating $30,000 to the furnishings is “incidental” to the sale of the real estate and the entire amount is subject to the 10% withholding. It may be possible to restructure the transaction with there being two separate contracts: one for the real estate for $295,000 and another for the furnishings for $30,000. Further analysis and planning would be required to determine the consequences of this strategy.

On a completely unrelated issue we want to discuss our policy of returning telephone calls from realtors and foreign sellers. We normally return phone calls by the end of the same day we receive them. However, sometimes we may not be able to return them until the end of the following day due to a high volume of phone calls and existing client commitments. As you know we do not charge for these initial phone calls and we try to fit them in with our regular client workload. We do return all phone calls by the end of the following day whether they be domestic or international. We appreciate your understanding and ask you to advise your foreign clients of our return phone call policy. As you know we are the only firm that exclusively services the international community. We want to continue to provide excellent service and need sufficient time to fully understand and deal with the issues affecting our foreign clients. We appreciate your understanding and thank you for your referrals.

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.