Manhattan real estate attorney Peter Zinkovetsky (https://www.avenuelawfirm.com/firpta-withholding-in-new-york/) of Avenue Law Firm has recently published an insightful article detailing the intricacies of the Foreign Investment in Real Property Tax Act (FIRPTA) and its implications on real estate transactions involving foreign investors in New York. The article serves as a crucial resource for understanding the tax obligations under FIRPTA.
Foreign investors and stakeholders in the New York real estate market are often faced with complex tax regulations. The Manhattan real estate attorney explains the importance of comprehending FIRPTA withholding, a fundamental aspect that can significantly affect the financial outcomes for foreign individuals and entities selling U.S. real property interests.
According to the Manhattan real estate attorney, “FIRPTA is a critical piece of legislation that aims to secure tax compliance by foreign sellers on their real estate transactions in the United States. The responsibilities it places on buyers and withholding agents are pivotal to the U.S. tax collection system.”
The article delves into the definition of a “real property interest” as per the Internal Revenue Service (IRS) and the roles of non-resident aliens, foreign corporations, and trusts or estates within the scope of FIRPTA. The act mandates withholding of tax on proceeds from the sale of U.S. real property interests by foreign entities to ensure they meet tax obligations.
Peter Zinkovetsky further explains the buyer’s role in FIRPTA withholding. The buyer must ascertain whether the seller is a foreign person and subsequently withhold and remit the required tax amount to the IRS. This responsibility underscores the need for buyers to engage with professionals who are adept at navigating FIRPTA’s requirements.
“The duties of the withholding agent are quite specific and must be adhered to meticulously,” Zinkovetsky states. “From determining the seller’s foreign status to calculating and remitting the appropriate tax amount, the process is stringent and demands a comprehensive understanding and attention to detail.”
The article also outlines the FIRPTA withholding rates, including the general rate of 15% of the gross sale proceeds and the reduced rate under certain conditions. Zinkovetsky emphasizes the possibility of reduced withholding or exemptions and the procedure for applying for a FIRPTA Withholding Certificate, which can significantly impact the financial aspects of the transaction for the foreign seller.
Exceptions to FIRPTA withholding are also detailed in the article. These include scenarios where the property is acquired as a personal residence, and certain nonrecognition transactions, among others. Understanding these exceptions is vital for both buyers and sellers to ensure compliance and avoid unnecessary tax burdens.
The consequences of non-compliance with FIRPTA withholding are severe and can include liability for taxes, interest, penalties, and investigations by the IRS. Zinkovetsky underscores the gravity of these repercussions and the importance of consulting with a skilled New York real estate lawyer.
For individuals and entities involved in the New York real estate market, understanding and adhering to FIRPTA regulations is imperative. Peter Zinkovetsky’s article serves as a valuable guide.
For those seeking to secure their financial future and navigate the complexities of the U.S. real estate market, the guidance of a seasoned Manhattan real estate attorney is indispensable.
About Avenue Law Firm:
Avenue Law Firm, located in New York City, is a legal practice with a focus on real estate law. Led by Peter Zinkovetsky, the firm boasts a team of diligent attorneys who bring a wealth of knowledge and experience to the table. Their commitment to providing legal advice and representation to their clients is evident in their meticulous approach to real estate transactions and tax regulations. The firm’s dedication to upholding the highest standards of legal excellence is reflected in their proactive and client-centric approach.
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