Tax Withheld on Real Property Sales If you are a nonresident alien and you dispose of a U.S. realproperty interest, the transferee (buyer) of the property generallymust withhold a tax equal to 10% of the amount realized on thedisposition. Withholding is also required on certain distributions andother transactions by domestic or foreign corporations, partnerships,trusts, and estates. These rules are covered in Publication 515underU.S. Real Property Interest. If you are a partner in a domestic partnership, and the partnershipdisposes of a U.S. real property interest at a gain, tax will bewithheld by the partnership on the amount of gain allocable to itsforeign partners. Your share of the income and tax withheld will bereported to you on Form 8805, Foreign Partner's InformationStatement of Section 1446 Withholding Tax, or Form 1042-S,Foreign Person's U.S. Source Income Subject to Withholding(in the case of a publicly traded partnership). Withholding is not required in the following situations. The property is acquired by the buyer for use as a residenceand the amount realized (purchase price) is not more than$300,000. The property disposed of is an interest in a domesticcorporation if any class of stock of the corporation is regularlytraded on an established securities market. The property disposed of is an interest in a corporationthat is not regularly traded on an established market if you give thebuyer a copy of a statement issued by the corporation certifying thatthe interest is not a U.S. real property interest. You (the seller) give the buyer a certification stating,under penalties of perjury, that you are not a foreign person, andcontaining your name, U.S. taxpayer identification number, and homeaddress. The buyer receives a withholding certificate from theInternal Revenue Service. You give the buyer written notice that you are not requiredto recognize any gain or loss on the transfer because of anonrecognition provision in the Internal Revenue Code or a provisionin a U.S. tax treaty. The buyer must file a copy of the notice withthe: Director, Philadelphia Service Center, 11601 Roosevelt Blvd.,Philadelphia, PA 19255 Attn: Drop Point 543X. The amount you realize on the transfer of a U.S. realproperty interest is zero. The property is acquired by the United States, a U.S. stateor possession, a political subdivision, or the District ofColumbia. The certifications in (3) and (4) must be disregarded by the buyerif the buyer has actual knowledge, or receives notice from a seller'sor buyer's agent, that they are false. The tax required to be withheld on a disposition can be reduced oreliminated under a withholding certificate issued by the IRS. Eitheryou or the buyer can request a withholding certificate. A withholding certificate can be issued due to any of thefollowing. A determination by the IRS that reduced withholding isappropriate because either: The amount required to be withheld would be more than thetransferor's maximum tax liability, or Withholding of the reduced amount would not jeopardizecollection of the tax. The exemption from U.S. tax of all gain realized by thetransferor. An agreement for the payment of tax providing security forthe tax liability, entered into by the transferee ortransferor. Get Publication 515and Form 8288-B for information onprocedures to request a withholding certificate. Credit for tax withheld.The buyer must report and pay over the withheld tax within 20 daysafter the transfer using Form 8288, U.S. Withholding Tax Returnfor Dispositions by Foreign Persons of U.S. Real Property Interests.This form is filed with the IRS with two copies of Form8288-A, Statement of Withholding on Dispositions by ForeignPersons of U.S. Real Property Interests. Copy B of thisstatement will be stamped received by the IRS and returned to you (theseller). You must file Copy B with your tax return to take credit forthe tax withheld.