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Michael Gonzalez
Michael Gonzalez, Lawyer
Category: Real Estate Law
Satisfied Customers: 302
Experience:  Managing Member at Perez-Mena & Gonzalez, LLC
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We are about to close on a property we're selling. It was a

Customer Question

We are about to close on a property we're selling. It was a life estate for my Mother, (she passed away in January of this year). Me, my sister and brother are now joint tenants in the property. My sister in not a U.S. Citizen, she is a citizen of Mexico. She does however have a Social Security Number that she obtained during the time she lived and worked in the U.S.
Our closing attorney indicates the following "As such, and as the buyer is not occupying the property as a primary residence, we must withhold 15% (up from 10% as of 02.16.16) of the sales price and remit the same to the IRS under the “Foreign Investment Real Property Transfer Act” aka “FIRPTA”. She may apply for a withholding certificate from the IRS to avoid us having to withhold funds however she would have to obtain that prior to closing. If not, we must withhold and remit at closing the 15% of the sales price. at becasue of this situation". I tried to explain to our closing attorney that there are three (3) owners to this property, two (2) of which are U.S. Citizens and that they should not be subject to the same FIRPTA tax as my sister. My CPA says the same thing. It there a GA statue that this closing attorney can review that would substantiate our arguement?
Submitted: 1 year ago.
Category: Real Estate Law
Customer: replied 1 year ago.
Meant to say Federal statue, then property in located in Georgia
Expert:  Michael Gonzalez replied 1 year ago.

Hello and welcome to JustAnswer. Please note: This is general information for educational purposes only and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms.

First, you do not indicate the amount of the sale proceeds realized.

Generally you do not have to withhold in the following situation: You (the transferee) acquire the property for use as a residence and the amount realized (sales price) is not more than $300,000. You or a member of your family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer. When counting the number of days the property is used, do not count the days the property will be vacant. For this exception, the transferee must be an individual.

Presuming the the sale price IS more than $300,000 there is not an obvious exception under the IRS rules. I would agree that the withholding should only be on the portion gained by the that party. I would have your CPA send an opinion in writing to the closing agent/attorney to assuage his or her concerns. However, the closing agent/attorney will be unlikely to take the risk as the buyer can come back to the closing agent/attorney for any tax consequences that were not dealt with at closing. If your CPA cannot cite the IRS rule then you may want to consult a tax attorney in your area.

Customer: replied 1 year ago.
Thank you for your response. We are the sellers of the property and we have a contract on the property for $155,000.
Expert:  Michael Gonzalez replied 1 year ago.

I understand. Then, the first exception that I referred to above may apply.

Expert:  Michael Gonzalez replied 1 year ago.

Please accept my response so that I may receive credit.

Thanks

Customer: replied 1 year ago.
Thank you
Expert:  Michael Gonzalez replied 1 year ago.

You are welcome. When you can please accept my answer and be so kind as to rate my service.

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