New Jersey Non-Foreign Affidavit Under IRC 1445
Description
Key Concepts & Definitions
Non Foreign Affidavit Under IRC 1445 refers to a legal document used in the United States to certify that an individual or entity selling real property is not a foreign person. This is crucial for the purposes of the Foreign Investment in Real Property Tax Act (FIRPTA), as it prevents withholding of a portion of the sale proceeds which is otherwise required when the seller is a foreign entity.
Step-by-Step Guide
- Gather Necessary Information: Before drafting a non foreign affidavit, collect all necessary details including the tax identification number, legal name, and contact information of the seller.
- Create the Affidavit: Draft the affidavit stating that the seller is not a foreign person as defined under IRC 1445. Include statements attesting to the seller's residency status.
- Notarization: Have the affidavit notarized to legally affirm the identity and the declarations made by the seller.
- Submit the Affidavit: Provide the affidavit to the buyer and/or escrow agent prior to the closing of the property sale to ensure no withholding is required.
Risk Analysis
- Incorrect Information: Providing false or incorrect information on a non foreign affidavit can lead to severe legal penalties including fines and potential criminal charges.
- Delay in Submission: Late submission of the affidavit can result in the withholding of sale proceeds, complicating financial aspects of the property transfer.
- Legal Disputes: Failing to properly validate the affidavit's claims may result in disputes or legal challenges post-transaction, especially if the seller's non-foreign status is later questioned.
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FAQ
FIRPTA Exemptions The sales price is $300,000 or less, and. The buyer signs affidavit at or before closing stating they intend to use property for personal purposes for at least 50% of time property occupied for the each of the first two 12 month periods immediately after closing.
What Is a Certification of Non-Foreign Status? With a Certification of Non-Foreign Status, the seller of real estate is certifying under penalty of perjury, that the seller is not foreign. Therefore, the seller and the transaction will not have the withholding requirements.
This document, included in the seller's opening package, requests that the seller swears under penalty of perjury that they are not a non-resident alien for purposes of United States income taxation. A Seller unable to complete this affidavit may be subject to withholding up to 15%.
A foreign person includes a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, foreign estate, and any other person that is not a U.S. person. It also includes a foreign branch of a U.S. financial institution if the foreign branch is a qualified intermediary.
Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers' agents, and settlement officers are required to withhold 15% (10% for dispositions before February 17, 2016) of the amount realized on the disposition (special rules for foreign corporations).
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.
The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to income tax withholding (IRC section 1445). The transferee is the withholding agent.If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax.
You or a member of your family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer.