26 USC 1445 - Withholding of tax on dispositions of United States real property interests

View all text of Subchapter A [§ 1441 - § 1446]

§ 1445. Withholding of tax on dispositions of United States real property interests

(a) General rule

(b) Exemptions

(1) In general

(2) Transferor furnishes nonforeign affidavit

(3) Nonpublicly traded domestic corporation furnishes affidavit that interests in corporation not United States real property interestsExcept as provided in paragraph (7), this paragraph applies in the case of a disposition of any interest in any domestic corporation if the domestic corporation furnishes to the transferee an affidavit by the domestic corporation stating, under penalty of perjury, that—

(A) the domestic corporation is not and has not been a United States real property holding corporation (as defined in section 897(c)(2)) during the applicable period specified in section 897(c)(1)(A)(ii), or

(B) as of the date of the disposition, interests in such corporation are not United States real property interests by reason of section 897(c)(1)(B).

(4) Transferee receives qualifying statement

(A) In general

(B) Qualifying statementFor purposes of subparagraph (A), the term “qualifying statement” means a statement by the Secretary that—

(i) the transferor either—(I) has reached agreement with the Secretary (or such agreement has been reached by the transferee) for the payment of any tax imposed by section 871(b)(1) or 882(a)(1) on any gain recognized by the transferor on the disposition of the United States real property interest, or(II) is exempt from any tax imposed by section 871(b)(1) or 882(a)(1) on any gain recognized by the transferor on the disposition of the United States real property interest, and

(ii) the transferor or transferee has satisfied any transferor’s unsatisfied withholding liability or has provided adequate security to cover such liability.

(5) Residence where amount realized does not exceed $300,000This paragraph applies to the disposition if—

(A) the property is acquired by the transferee for use by him as a residence, and

(B) the amount realized for the property does not exceed $300,000.

(6) Stock regularly traded on established securities market

(7) Special rules for paragraphs (2), (3), and (9)Paragraph (2), (3), or (9) (as the case may be) shall not apply to any disposition—

(A) if—

(i) the transferee or qualified substitute has actual knowledge that the affidavit referred to in such paragraph, or the statement referred to in paragraph (9)(A)(ii), is false, or

(ii) the transferee or qualified substitute receives a notice (as described in subsection (d)) from a transferor’s agent, transferee’s agent, or qualified substitute that such affidavit or statement is false, or

(B) if the Secretary by regulations requires the transferee or qualified substitute to furnish a copy of such affidavit or statement to the Secretary and the transferee or qualified substitute fails to furnish a copy of such affidavit or statement to the Secretary at such time and in such manner as required by such regulations.

(8) Applicable wash sales transactions

(9) Alternative procedure for furnishing nonforeign affidavitFor purposes of paragraphs (2) and (7)—

(A) In generalParagraph (2) shall be treated as applying to a transaction if, in connection with a disposition of a United States real property interest—

(i) the affidavit specified in paragraph (2) is furnished to a qualified substitute, and

(ii) the qualified substitute furnishes a statement to the transferee stating, under penalty of perjury, that the qualified substitute has such affidavit in his possession.

(B) Regulations

(1) Cannot exceed transferor’s maximum tax liability

(A) In general

(B) Request

(2) Authority of Secretary to prescribe reduced amount

(3) Procedural rules

(A) RegulationsRequests for—

(i) qualifying statements under subsection (b)(4),

(ii) determinations of transferor’s maximum tax liability under paragraph (1), and

(iii) reductions under paragraph (2) in the amount required to be withheld,

shall be made at the time and manner, and shall include such information, as the Secretary shall prescribe by regulations.

(B) Requests to be handled within 90 days

(4) Reduced rate of withholding for residence where amount realized does not exceed $1,000,000In the case of a disposition—

(A) of property which is acquired by the transferee for use by the transferee as a residence,

(B) with respect to which the amount realized for such property does not exceed $1,000,000, and

subsection (a) shall be applied by substituting “10 percent” for “15 percent”.

(d) Liability of transferor’s agents, transferee’s agents, or qualified substitutes

(1) Notice of false affidavit; foreign corporationsIf—

(A) the transferor furnishes the transferee or qualified substitute an affidavit described in paragraph (2) of subsection (b) or a domestic corporation furnishes the transferee an affidavit described in paragraph (3) of subsection (b), and

(B) in the case of—

(i) any transferor’s agent—(I) such agent has actual knowledge that such affidavit is false, or(II) in the case of an affidavit described in subsection (b)(2) furnished by a corporation, such corporation is a foreign corporation, or

(ii) any transferee’s agent or qualified substitute, such agent or substitute has actual knowledge that such affidavit is false,

such agent or qualified substitute shall so notify the transferee at such time and in such manner as the Secretary shall require by regulations.

(2) Failure to furnish notice

(A) In general

(B) Liability limited to amount of compensation

(3) Transferor’s agentFor purposes of this subsection, the term “transferor’s agent” means any person who represents the transferor—

(A) in any negotiation with the transferee or any transferee’s agent related to the transaction, or

(B) in settling the transaction.

(4) Transferee’s agentFor purposes of this subsection, the term “transferee’s agent” means any person who represents the transferee—

(A) in any negotiation with the transferor or any transferor’s agent related to the transaction, or

(B) in settling the transaction.

(5) Settlement officer not treated as transferor’s agentFor purposes of this subsection, a person shall not be treated as a transferor’s agent or transferee’s agent with respect to any transaction merely because such person performs 1 or more of the following acts:

(A) The receipt and the disbursement of any portion of the consideration for the transaction.

(B) The recording of any document in connection with the transaction.

(e) Special rules relating to distributions, etc., by corporations, partnerships, trusts, or estates

(1) Certain domestic partnerships, trusts, and estatesIn the case of any disposition of a United States real property interest as defined in section 897(c) (other than a disposition described in paragraph (4) or (5)) by a domestic partnership, domestic trust, or domestic estate, such partnership, the trustee of such trust, or the executor of such estate (as the case may be) shall be required to deduct and withhold under subsection (a) a tax equal to the highest rate of tax in effect for the taxable year under section 11(b) (or, to the extent provided in regulations, 20 percent) multiplied by the gain realized to the extent such gain—

(A) is allocable to a foreign person who is a partner or beneficiary of such partnership, trust, or estate, or

(B) is allocable to a portion of the trust treated as owned by a foreign person under subpart E of part I of subchapter J.

(2) Certain distributions by foreign corporations

(3) Distributions by certain domestic corporations to foreign shareholders

(4) Taxable distributions by domestic or foreign partnerships, trusts, or estates

(5) Rules relating to dispositions of interest in partnerships, trusts, or estates

(6) Distributions by regulated investment companies and real estate investment trusts

(7) Regulations

(f) DefinitionsFor purposes of this section—

(1) Transferor

(2) Transferee

(3) Foreign personThe term “foreign person” means any person other than—

(A) a United States person, and

(B) except as otherwise provided by the Secretary, an entity with respect to which section 897 does not apply by reason of subsection (l) thereof.

(4) Transferor’s maximum tax liabilityThe term “transferor’s maximum tax liability” means, with respect to the disposition of any interest, the sum of—

(A) the maximum amount which the Secretary determines could be imposed as tax under section 871(b)(1) or 882(a)(1) by reason of the disposition, plus

(B) the amount the Secretary determines to be the transferor’s unsatisfied withholding liability with respect to such interest.

(5) Transferor’s unsatisfied withholding liability

(6) Qualified substituteThe term “qualified substitute” means, with respect to a disposition of a United States real property interest—

(A) the person (including any attorney or title company) responsible for closing the transaction, other than the transferor’s agent, and

(B) the transferee’s agent.

(Added Pub. L. 98–369, div. A, title I, § 129(a)(1), July 18, 1984, 98 Stat. 655; amended Pub. L. 99–514, title III, § 311(b)(4), title XVIII, § 1810(f)(2)–(4)(A), (5), (6), (8), Oct. 22, 1986, 100 Stat. 2219, 2827, 2828; Pub. L. 100–647, title I, § 1003(b)(3), Nov. 10, 1988, 102 Stat. 3384; Pub. L. 103–66, title XIII, § 13221(c)(3), Aug. 10, 1993, 107 Stat. 477; Pub. L. 104–188, title I, § 1704(c)(1), Aug. 20, 1996, 110 Stat. 1878; Pub. L. 105–34, title III, § 311(c)(1), Aug. 5, 1997, 111 Stat. 835; Pub. L. 108–27, title III, § 301(a)(2)(C), May 28, 2003, 117 Stat. 758; Pub. L. 109–222, title V, §§ 505(b), 506(b), May 17, 2006, 120 Stat. 356, 358; Pub. L. 110–289, div. C, title I, § 3024(a)–(c), July 30, 2008, 122 Stat. 2895; Pub. L. 112–240, title I, § 102(c)(1)(C), (3), Jan. 2, 2013, 126 Stat. 2319; Pub. L. 114–113, div. Q, title III, §§ 323(b), 324(a), (b), Dec. 18, 2015, 129 Stat. 3103; Pub. L. 115–97, title I, § 13001(b)(3)(A)–(C), Dec. 22, 2017, 131 Stat. 2097.)