Section 1445 of the Internal Revenue Code generally imposes a withholding obligation on purchasers (i.e., the “transferee”) with respect to a seller’s disposition of a “U.S. real property interest” (USRPI). Under section 1461, the transferee/purchaser is liable for withholding tax on the disposition. Withholding is a mechanism to collect the tax that is imposed by the Foreign Investment in Real Property Tax Act (“FIRPTA”). Notably, though beyond the scope of this article, the FIRPTA statute and regulations contain several exceptions to the withholding requirement, and in certain circumstances, allow a transferee to obtain a withholding certificate to reduce the withholding agent’s withholding liability.
The FIRPTA regulations impose liability on any person required to withhold who fails to do so. The regulations provide that:
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