FOREIGN SELLERS

Published 1.22.16

The strong U.S. Dollar in relation to the Canadian Dollar, Euro, and the Pound, is causing some foreign homeowners in Southwest Florida to consider “cashing in” on their investment.  At today’s currency exchange rates, a Canadian seller netting $500,000 U.S. from the sale of a home converts to $725,000 Canadian today, compared to only $500,000 Canadian just 2 years ago.  A German seller netting $500,000 U.S. converts to $459,000 Euros, compared to only $370,000 Euros just 2 years ago.  The same proceeds convert to 350,000 British Pounds, compared to only 305,000 Pounds just 2 years ago. 

The Boeglin Team currently has 4 listed homes owned by foreign citizens, and have been contacted by additional foreign homeowners who are considering listing their homes at this time.  Disposition of U.S. real property may subject the transaction to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).  It is vitally important for a foreign homeowner to be aware of this law, and involve professionals who are familiar with FIRPTA, its applications, and exemptions.  The Boeglin Team has been involved in such transactions in the past, and has access to the tax professionals who specialize in FIRPTA issues.

FIRPTA may also apply to buyers of homes owned by foreign interests.  If the law applies to the purchase, then there is a required IRS filing and withholding.  There are exemptions available, and it is important that buyers of such homes involve professionals familiar with FIRPTA.

In general, this law imposes a U.S. Income Tax on foreign persons disposing of U.S. real property interests.  Tax is imposed on the amount of gain considered recognized.  The buyer is required to withhold a % of the proceeds to cover the tax liability.  Penalties apply if the buyer fails to withhold or file the required IRS forms within 20 days of the transaction.

The main exemptions are:

  1.  The price of the real estate is $300,000 or less and the buyer intends to use the home as a residence; or
  2. The purchaser receives a statement from the seller that the seller is not a “foreign person” as defined by FIRPTA.

If you are a foreign homeowner, or a potential buyer of a home owned by a foreign person, please contact us for assistance.