For my first blog entry, I have decided to whet your appetite with an excerpt from my book, Owning U.S. Property- The Canadian Way. Here’s the first half of one of my favorite chapters – Chapter 10: Selling Your U.S. Vacation Home
Chapter 10: Selling Your U.S. Vacation Home
Reducing the U.S. Capital Gain Tax
So, you’re selling your condo in Boca Raton, Florida. You paid $500,000 and the sale price is $1 million… Nice work!
IRS Withholding under FIRPTA
FIRPTA stands for Foreign Investment in Real Property Tax Act which is the U.S. federal law that states that, under section 1445 IRC, 10% of the gross sales price of the sale of real estate by a non-resident of the U.S. must be withheld by the closing agent on behalf of the buyer and remitted to the Internal Revenue Service. In our above example that would be $100,000.
This is NOT a tax; it is simply a withholding whereby the IRS will apply it against the tax payable on the capital gain. In this case, the capital gain is the difference between the sale price of $1 million and the initial purchase price of $500,000.
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