STATEMENT OF THE ISSUE/LEGISLATION/RULE

ISSUE: Internal Revenue Service adopts new rules dealing with sales of real estate by foreign owners                                   

BRIEF EXPLANATORY STATEMENT OF FACTS:

Effective November 4, 2003 a foreign owner of real property will be required to provide a taxpayer identifying number (TIN) in connection with the sale of the property. The buyer will report the TIN when depositing the 10% withholding amount to the IRS.

IMPLICATIONS TO IAR MEMBERS:

Certain properties are exempt, such as residential properties selling for less than $300,000 that will be occupied by the buyer if the seller certifies no recognition of gain or loss. Potential delay in the transaction if a foreign owner does not have a TIN and needs to obtain one. The agent is potentially liable for the 10% withholding tax if the agent knows a false affidavit is provided to the buyer stating the seller is not a foreign person and the agent fails to disclose the false statement.

SPECIFIC LINK FOR EXPANDED LANGUAGE OR DETAILS

IAR Hot Issues Resources/Taxpayer Identifying Numbers

STAFF CONTACT:           
Betsy Urbance

800/752-3274

fax 217/529-3904

Nov. 2003