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Title Insurance Industry Articles


FIRPTA WITHHOLDING 101 PDF Print E-mail

What is FIRPTA Withholding and How Does it Work? 

Withholding of Tax on Dispositions of United States Real Property Interests

The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A disposition means “disposition” for any purpose of the Internal Revenue Code.  This includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc.  A U.S. real property interest includes sales of interests in parcels of real property as well as sales of shares in certain U.S. corporations that are considered U.S. real property holding corporations. Persons purchasing U.S. real property interests (transferee) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold 10 percent of the amount realized (special rules for foreign corporations) Withholding is intended to ensure U.S. taxation of gains realized on disposition of such interests. The transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax.

The amount that must be withheld from the disposition of a U.S. real property interest can be adjusted pursuant to a withholding certificate issued by the IRS.

  • A disposition includes the sale of any U.S. real property interests in the United States or U.S. Virgin Islands.
  • Generally speaking, in reference to the disposition of a U.S. real property interest, the foreign person disposing of the US real property interest is referred to as the transferor.
  • The purchaser of the U.S. real property interest is referred to as the transferee.
  • Generally, the amount realized is the purchase/sales price of the U.S. real property interest but can also include any property received by the transferor and any liability relieved of by the transferor.
  • Generally, the buyer/transferee must determine if the seller is a foreign person. If so, the buyer/transferee is responsible for the withholding taxes.
  • The buyer/transfer  may be held liable for the tax that should have been withheld on the purchase.Image Courtesy of Google Images

One of the most common exceptions to FIRPTA withholding is that the buyer/transferee is not required to withhold tax in a situation in which the buyer/transferee purchases real estate for use as his personal residence and the purchase price is not more than $300,000.

 

For additional information on the withholding rules that apply to corporations, trusts, estates, and REITs, refer to section 1445 of the Internal Revenue Code and the related regulations. For additional information on the withholding rules that apply to partnerships, refer to discussion under partnership withholding. Also consult IRSPublication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, section U.S. Real Property Interest.

Additional information may be obtained from:

Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409.

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.

 
Why do I need Title Insurance? PDF Print E-mail
Written by Ticor Title Insurance Company   

Buying Property Is A Numbers Business

  1. A fire destroys only the house and improvements. The ground is left. A defective title may take away not the only the house but also the land on which it stands. Title insurance protects you (as specified in the policy) against such loss.
  2.  

  3. A deed or mortgage in the chain of title may be a forgery.
  4.  

  5. A deed or a mortgage may have been signed by a person under age.
  6.  

  7. A deed or a mortgage may have been made by an insane person or one otherwise incompetent.
  8.  

  9. A deed or a mortgage may have been made under a power of attorney after its termination and would, therefore, be void.
  10.  

  11. A deed or a mortgage may have been made by a person other than the owner, but with the same name as the owner.
  12.  

  13. The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property.
  14.  

  15. A deed or mortgage may have been procured by fraud or duress.
  16.  

  17. Title transferred by an heir may be subject to a federal estate tax lien.
  18.  

  19. An heir or other person presumed dead may appear and recover the property or an interest therein.
  20.  

  21. A judgment or levy upon which the title is dependent may be void or voidable on account of some defect in the proceeding.
  22.  

  23. Title insurance covers attorneys’ fees and court costs.
  24.  

  25. Title insurance helps speed negotiations when you’re ready to sell or obtain a loan.
  26.  

  27. By insuring the title, you can eliminate delays and technicalities when passing your title on to someone else.
  28.  

  29. Title insurance reimburses you for the amount of your covered losses.
  30.  

  31. A deed or mortgage may be voidable because it was signed while the grantor was in bankruptcy.
  32.  

  33. Each title insurance policy we write is paid up, in full, by the first premium for as long as you or your heirs own the property.
  34.  

  35. There may be a defect in the recording of a document upon which your title is dependent.
  36.  

  37. Claims constantly arise due to marital status and validity of divorces. Only title insurance protects against claims made by non-existent or divorced "wives" or "husbands."
  38.  

  39. Many lawyers, in giving an opinion on a title, protect their clients as well as themselves, by procuring title insurance.
  40.  

  41. Over the last 24 years, claims have risen dramatically.

We Hope You Never Have A Title Claim
Americans have the future in mind when they buy a house, and they purchase homeowner’s insurance to help protect that future. But with home ownership comes the need to protect the property against the past, as well as the future.

Title insurance protects a policyholder against challenges to rightful ownership of real property, challenges that arise from circumstances of past ownerships. Each successive owner brings the possibility of title challenges to the property.

When you purchase real property, rely on Ticor Title to protect your interests. You’ll be insured by a company backed by more than 150 years of successful title operations.

Rely On Ticor Title To Protect Your Investment
Every owner, purchaser and beneficiary, whether by a deed or contract, should have an insured title. The entire investment depends upon the quality of title. If you are buying real estate mortgages, you are paying for a good title and you should see that you have one. If either fire insurance or title insurance is omitted, your security is not complete.

Our title policy protects you against unforeseen defects in title that an abstract or the public records do not show and cannot show…nor any attorney’s opinion includes.

Whether this is your first or fiftieth real estate investment, ask your real estate agent or broker to specify Ticor Title during your transaction.

 
Document Execution Guidelines PDF Print E-mail
Written by By: Fidelity National Title Group   

Subject to requirements and limitations of applicable State and Local Law, our direct operations must adhere to one of the following procedures for all documents upon which a Company title product is based in all transactions other than the listed exceptions:

 
1. All document signings must be conducted in the presence of an authorized employee of the Company or title policy issuing agent (collectively “Company representative") regardless of who performs the actual notarization. The Company Representative must require the production of proper identification and personally examine it to verify the identity of the executing parties. Even if the notary is not an employee of the Company or the title policy issuing agent, it is the responsibility of the Company Representative to insure that the notary follows industry standards in conducting the signing; or
 
2. The document signings must be conducted through Bancserv, a brand neutral FNF company which is covered by a $15 million E&O policy that extends to all of the notaries that it retains. (Information on Bancserv can be obtained from its website at www.bancserv.net or 800-721-5558; your favorite notary may sign up with Bancserv and continue to work with you.); or
 
3. The document signings must be conducted by a notary or signing service that maintains E&O insurance of $100,000 or higher and is approved in writing by a Company Regional Manager. (E&O coverage is available for inexpensive premiums through the National Association of Notaries, www.nationalnotary.org.); or
 
4. The document signings must be conducted under the supervision of attorneys actively licensed in the state where the document signings take place; or
 
5. The document signings must be conducted in accordance with a procedure approved in writing by a Company Regional Manager (this option allows for local custom and practice to be followed).
 
Exempt Transactions
1. Documents executed in accordance with existing guidelines for foreign individuals and entities and military personnel.
2. Documents executed directly with the insured lender (not the mortgage broker).
3. Documents provided by independent escrows or closing services approved by the Company Regional Manager or their designee.
4. Documents executed for commercial transactions in an amount of three million or greater ($3,000,000).
 
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