If the seller used the property for residential purposes, FIRPTA mandates that the buyer of the property withhold 15% of the entire transaction price. The withholding rate is 10% if the property hasn’t been used for residential purposes. Therefore, the sort of property being sold and how it will be used determine the withholding rate.
The issue of whether FIRPTA applies to resident aliens now arises since the withholding rate varies depending on the kind of property being sold. Yes, it is the answer. In accordance with FIRPTA, resident aliens must pay taxes on gains from the sale of real estate in the US just like non-resident immigrants do. The tax treaties between the United States and their native country, however, permit resident foreigners to request exemptions.
Another relevant concern is whether LLCs are covered by FIRPTA. Yes, LLCs that are designated as disregarded entities for tax purposes must comply with FIRPTA. The ultimate owner of the LLC in these situations, who also happens to be a foreign person, is subject to the withholding rules.
Similarly, partnerships with foreign partners are subject to FIRPTA. In such circumstances, the foreign partner’s distributive share of the partnership’s income, gain, or loss resulting from the sale of real estate property in the United States is subject to the withholding obligations.
Last but not least, the issue of FIRPTA refunding comes up. Yes, it is the answer. The seller can file a tax return with the IRS to request a refund of the excess amount if the amount withheld exceeds the foreign seller’s tax liability.
In conclusion, resident aliens, LLCs, and partnerships with foreign partners are all subject to FIRPTA withholding, which varies based on the type of property being sold and its intended purpose. Tax treaties, however, permit exemptions, and FIRPTA can be repaid if the amount withheld exceeds the foreign seller’s tax burden.