FIRPTA / Domestic Partnership with Foreign Partners

Technical topics regarding tax preparation.
#1
nvea  
Posts:
12
Joined:
15-May-2018 9:54am
Location:
FL
Good morning All,

Looking to confirm the items listed below. When it comes to the partnership aspect I have seen two practices, but the one listed below is my understanding. Anything input is greatly appreciated.

Scenario:
- Domestic Partnership with 2 foreign partners and they are the only partners
- Selling a one of their rental units in US

Analysis
- Subject to Firpta withholding due to the special rules under sec 1445 and USRPI
- 1445 (e)(1)
(e) Special rules relating to distributions, etc., by corporations, partnerships, trusts, or estates
(1) Certain domestic partnerships, trusts, and estatesIn the case of any disposition of a United States real property interest as defined in section 897(c) (other than a disposition described in paragraph (4) or (5)) by a domestic partnership, domestic trust, or domestic estate, such partnership, the trustee of such trust, or the executor of such estate (as the case may be) shall be required to deduct and withhold under subsection (a) a tax equal to the highest rate of tax in effect for the taxable year under section 11(b) (or, to the extent provided in regulations, 20 percent) multiplied by the gain realized to the extent such gain—
(A) is allocable to a foreign person who is a partner or beneficiary of such partnership, trust, or estate, or
(B) is allocable to a portion of the trust treated as owned by a foreign person under subpart E of part I of subchapter J.

Prepare at the highest withholding rate and calculate the true withholding based on the realized gain, if any.

Thanks in advance.
 

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