New FIRPTA Changes for Foreign Sellers !!
Maureen and I just represented two Canadians who sold their Palmer Ranch home in Villagewalk .
Although they loved their unit, and Sarasota, they basically sold to reap the huge currency exchange gains. This couple purchased in 2010 for $215,000 when the US dollar and Canadian dollar were virtually at par. Today, the USD is some 30% stronger as they sell for $290,000. That $75,000 differential actually translates closer to $100,000 in Canadian dollars.
We informed our sellers up front that the FIRPTA withholding on the sale of all foreign-owned US real property was recently changed from 10% to 15% on February 16/2016.
That meant that their $290,000 sale would not have $29,000 held back for potential capital gains, but $43,500. That’s a pretty large hold back considering the capital gains for our clients will be nowhere near that level.
Sure, you can apply for a waiver if the actual tax on the sale will be far less than 15%. But that needs to be done well in advance, and we did not have the luxury of time to complete and submit the appropriate forms.
Fortunately, we were able to take advantage of a lesser known FIRPTA rule. If a personal residence sells for less than $300,000, AND the buyer plans to reside at the property “at least 50% of the number of days the property is used during each of the first 2 years following the date of the sale ” then no FIRPTA tax is required. The buyer must be willing to sign a form stating this, and they did !
Problem solved. No “up front” withholding…but my clients must still claim the sale
and pay the appropriate capital gains tax…but a least they have the luxury of having all their money and waiting until tax time next year to pay what they owe.
There are other new rules for sales over $300,000 …so send me an e-mail at firstname.lastname@example.org or call me 941-993-3160
to learn more.