FIRPTA as a buyer of a residential LOT

Maybe someone can shed some light on this. We are US citizens and live in Florida. We just closed on a deal to buy a residential LOT from foreign sellers (Canadians). For those who may not know, FIRPTA stands for “Foreign Investment in Real Property Tax Act.” It is basically a way for the IRS in the US, to be assured they get their taxes on the sale of the property from Foreign Sellers. We had a basic understanding of this when we went to the closing a couple of days ago. Since then we have read up on the FIRPTA nuances and rules a little. At the closing there was 15% of the sale price of this lot, withheld from the Seller’s closing monies. Since we are the Buyer, this didn’t effect the monies we paid for the lot at closing. So, the closing agent told us this check for 15% (withholding), would be sent to the IRS “on our behalf.” We actually saw a check for this purpose. According to the rules we have read, this makes sense, as the onus is on the Buyer to facilitate the sending of these funds to the IRS, and the closing agent is acting on our behalf to send the funds to the IRS… OK. All Good. Next, however, the closing agent at the title company tells us that the IRS will send these funds back to us within 6 weeks. This makes no sense, and we almost think the closing agent is wrong on this. These funds did not come out of our funds at closing and were not added to the amount we paid for this lot. I would think the funds would be sent to the Seller of ths lot, the Canadians. What am I missing here? Let me give you an example with real numbers – say we agreed to pay $100,000 for this lot. We were instructed to wire funds very close to this amount for closing. (plus some small fees and real estate taxes). The amount of the check to the IRS is 15%, so $15,000. The closing agent told us the IRS would mail a check in this amount to us in approximately 6 weeks. Does this make sense to anybody? If this is true, then we got a discount on the lot of $15,000… This does not seem correct to me. Thanks for any info.

I would agree that it would make no sense for the IRS to send you the money. It should be applied to the foreign owner’s account. Any refund would be to the foreign owner, after they file an income tax return.

That said, taxes don’t always make sense. Let us know if you get a check.



Thanks AJ. Yeah, I suspect we will never see that check. Somewhere I was reading that the Seller may get a refund in a 1 to a year and a half. The title company agent told us we would get a check in 6 weeks. I doubt it.

Presuming you closed in 2024, the seller would be liable for any capital gains taxes for the 2024 tax year. If they don’t ask for an extension, their 2024 return would be due April 15, 2025. Presumably, it would have to be processed by hand, because they are not US citizens, so that means that their refund, if any, needs to be sent to them within 45 days, or it will start accruing interest. So that would give the IRS until the end of May, 2025 to send them the refund.

That said, if you had closed in December, 2023, the deadline for filing would be April 15, 2024, and the IRS would have until the end of May, 2024 to send the refund.

So it could be anywhere from 6 months to 17 months after closing, depending on when in the calendar year the closing occurred.


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