Form 8288 - U.s. Withholding Tax Return For Dispositions By Foreign Persons Of U.s. Real Property Interests Page 2

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Form 8288 (Rev. 8-2000)

Page

General Instructions

Withholding, to report and pay over the withheld

Transferor. For purposes of this withholding,

amounts. Do not use Forms 8288 and 8288-A

this means any foreign person that disposes of a

Section references are to the Internal Revenue

for these distributions. See Regulations section

U.S. real property interest by sale, exchange,

Code unless otherwise noted.

1.1445-8.

gift, or any other disposition.

Withholding agent. For purposes of this return,

Purpose of Form

When To File

this means the buyer or other transferee who

acquires a U.S. real property interest from a

A withholding obligation is generally imposed on

A transferee must file Form 8288 and transmit

the buyer or other transferee (withholding agent)

foreign person.

the tax withheld to the IRS by the 20th day after

when a U.S. real property interest is acquired

the date of transfer.

Foreign person. A nonresident alien individual, a

from a foreign person. The withholding obligation

foreign corporation that does not have a valid

You must withhold even if an application for a

also applies to certain partnerships, foreign and

election under section 897(i) to be treated as a

withholding certificate is or has been submitted

domestic corporations, and the fiduciary of

domestic corporation, a foreign partnership, a

to the IRS on the date of transfer. However, you

certain trusts and estates. This withholding

foreign trust, or a foreign estate. A resident alien

do not have to file Form 8288 and transmit the

serves to collect tax that may be owed by the

individual is not a foreign person.

withholding until the 20th day after the day the

foreign person. Use this form to report and

IRS mails you a copy of the withholding

U.S. real property interest. Any interest, other

transmit the amount withheld.

certificate or notice of denial. But if the principal

than an interest solely as a creditor, in:

Note: You are not required to withhold if any of

purpose for filing the application for a

1. Real property located in the United States

the Exceptions (which begin on this page) apply.

withholding certificate was to delay paying the

or the Virgin Islands.

IRS the amount withheld, interest and penalties

Amount To Withhold

2. Certain personal property associated with

will apply to the period after the 20th day after

the use of real property.

the date of transfer.

Generally, you must withhold 10% of the amount

3. A domestic corporation, unless it is shown

Installment payments. You must withhold the

realized on the disposition by the transferor (see

that the corporation was not a U.S. real property

Definitions on this page).

full amount at the time of the first installment

holding corporation during the previous 5 years

payment. If you cannot because the payment

See Corporations, Partnerships, Trusts, and

(or during the period in which the transferor held

does not involve sufficient cash or other liquid

Estates Subject to Section 1445(e) on page 3

the interest, if shorter).

assets, you may obtain a withholding certificate

for information about when withholding at 35%

A U.S. real property interest does not include:

from the IRS. See the instructions for Form

is required. Also see Withholding certificate

8288-B, Application for Withholding Certificate

1. An interest in a domestically controlled real

issued by the IRS on page 3 for information

for Dispositions by Foreign Persons of U.S. Real

estate investment trust (REIT).

about applying for reduction or elimination of

Property Interests, for more information.

withholding.

2. An interest in a corporation that has

disposed of all its U.S. real property interests in

Joint transferors. If one or more foreign persons

Where To File

transactions in which the full amount of any gain

and one or more U.S. persons jointly transfer a

Send Form 8288 with the amount withheld, and

was recognized as provided in section

U.S. real property interest, you must determine

Copies A and B of Form(s) 8288-A to the Internal

897(c)(1)(B).

the amount subject to withholding in the

Revenue Service Center, P.O. Box 21086, DP

following manner.

3. An interest in certain publicly traded

8731 FIRPTA Unit, Philadelphia, PA 19114-0586.

corporations, partnerships, and trusts.

1. Allocate the amount realized from the

transfer among the transferors based on their

See Regulations sections 1.897-1 and -2 for

Forms 8288-A Must Be Attached

capital contribution to the property. For this

more information. Also see Transferred

purpose, a husband and wife are treated as

Anyone who completes Form 8288 must

property that is not a U.S. real property

having contributed 50% each.

also complete a Form 8288-A, Statement of

interest on page 3.

Withholding on Dispositions by Foreign Persons

2. Withhold on the total amount allocated to

Amount realized. The sum of the cash paid or

of U.S. Real Property Interests, for each person

foreign transferors.

to be paid (not including interest or original issue

subject to withholding. Copies A and B of Form

discount), the fair market value of other property

3. Credit the amount withheld among the

8288-A must be attached to Form 8288. Copy C

transferred or to be transferred, and the amount

foreign transferors as they mutually agree. The

is for your records.

of any liability assumed by the transferee or to

transferors must request that the withholding be

After receipt of Form 8288 and Form(s)

which the U.S. real property interest is subject

credited as agreed upon by the 10th day after

8288-A, the IRS will stamp Copy B of Form

immediately before and after the transfer.

the date of transfer. If no agreement is reached,

8288-A to show receipt of the withholding and

Generally, the amount realized for purposes of

credit the withholding by evenly dividing it

will forward the stamped copy to the foreign

this withholding is the sales or contract price.

among the foreign transferors.

person subject to withholding at the address

Date of transfer. The first date on which

shown on Form 8288-A.

Who Must File

consideration is paid or a liability is assumed by

You are not required to furnish a copy of Form

the transferee. However, for purposes of

A buyer or other transferee of a U.S. real

8288 or 8288-A directly to the transferor. To

sections 1445(e)(2), (3), and (4), and Regulations

property interest, and a corporation, partnership,

receive credit for the withheld amount, the

sections 1.1445-5(c)(1)(iii) and 1.1445-5(c)(3), the

or fiduciary that is required to withhold tax, must

transferor generally must attach the stamped

date of transfer is the date of distribution that

file Form 8288 to report and transmit the amount

Copy B of Form 8288-A to a U.S. income tax

creates the obligation to withhold. Payment of

withheld. If two or more persons are joint

return (e.g., Form 1040NR or 1120-F) or

consideration does not include the payment

transferees, each is obligated to withhold.

application for early refund filed with the IRS.

before passage of legal or equitable title of

However, the obligation of each will be met if

earnest money (other than pursuant to an initial

one of the joint transferees withholds and

Penalties

purchase contract), a good-faith deposit, or any

transmits the required amount to the IRS.

similar amount primarily intended to bind the

Under section 6651, penalties apply for failure to

Publicly traded partnerships, publicly traded

parties to the contract and subject to forfeiture.

file Form 8288 when due and for failure to pay

trusts, and REITs. Distributions from a publicly

A payment that is not forfeitable may also be

the withholding when due. In addition, if you are

traded partnership are generally subject to the

considered earnest money, a good-faith deposit,

required to but do not withhold tax under section

withholding requirements of section 1446 and

or a similar sum.

1445, the tax, including interest, may be

are not subject to the withholding requirements

collected from you. Under section 7202, you

of section 1445. See Rev. Proc. 89-31, 1989-1

Exceptions

may be subject to a penalty of up to $10,000 for

C.B. 895. Distributions from a trust that is

willful failure to collect and pay over the tax.

You are not required to withhold if any of the

regularly traded on an established securities

Corporate officers or other responsible persons

following applies:

market and distributions from a real estate

may be subject to a penalty under section 6672

investment trust (REIT) are subject to section

1. Purchase of residence for $300,000 or

equal to the amount that should have been

1445 and its regulations. However, for such

less. One or more individuals acquire U.S. real

withheld and paid over to the IRS.

partnerships and trusts, generally the method of

property for use as a residence and the amount

paying over and reporting the withholding to the

realized (sales price) is not more than $300,000.

Definitions

IRS is governed by section 1461 and its

A U.S. real property interest is acquired for use

regulations and the deposit rules in Regulations

as a residence if you or a member of your family

Transferee. Any person, foreign or domestic,

section 1.6302-2. Use Form 1042, Annual

has definite plans to reside in the property for at

that acquires a U.S. real property interest by

Withholding Tax Return for U.S. Source Income

least 50% of the number of days the property is

purchase, exchange, gift, or any other

of Foreign Persons, and Form 1042-S, Foreign

used by any person during each of the first two

disposition.

Person’s U.S. Source Income Subject to

12-month periods following the date of transfer.

Do not take into account the number of days the

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