Instructions for IRS Form 8288 "U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests"

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Instructions for Form 8288
Department of the Treasury
Internal Revenue Service
(Rev. May 2018)
(Use with the April 2018 revision of Form 8288.)
U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real
Property Interests
2. The transferor realized a gain on
the case of a real restate investment trust
Section references are to the Internal Revenue
Code unless otherwise noted.
the sale; and
(REIT)) of that stock at any time during the
1-year period ending on the date of the
3. Any portion of the gain would be
Future Developments
distribution.
treated under section 864(c)(8) as
For the latest information about
effectively connected with the conduct of a
Use Form 1042, and Form 1042-S, to
developments related to Form 8288 and
trade or business within the United States.
report and pay over the withheld amounts.
its instructions, such as legislation
These instructions do not include
enacted after they were published, go to
Section 1446(f)(1) withholding.
the specific rules for withholding,
!
IRS.gov/form8288.
Transferees are required to report the
payment, and reporting under
section 1446(f)(1) tax withheld on Form
CAUTION
What's New
section 1446(f)(1), nor do the instructions
8828, and related information on Form
cover the specific exceptions to that
8288-A. Form more information, see
We made the following changes to the
withholding. See
Notice 2018-29
for these
Notice
2018-29.
prior version of Form 8288.
rules and the instructions for completing
To meet your withholding, payment,
Amount To Withhold
Forms 8288 and 8288-A.
and reporting requirements under new
Generally, you must withhold 15% of the
section 1446(f)(1), use Forms 8288 and
Who Must File
amount realized on the disposition by the
8288-A. Follow the instructions outlined in
transferor (see Definitions, later).
A buyer or other transferee of a U.S. real
Notice 2018-29, 2018-16 I.R.B. 495
property interest, and a corporation,
available at
IRS.gov/irb/
Note. Prior to February 17, 2016, the
qualified investment entity, or fiduciary
2018-16_IRB#NOT-2018-29. New section
transferor was generally required to
that is required to withhold tax, must file
1446(f)(1) was added by section 13501 of
withhold 10% of the amount realized on
Form 8288 to report and transmit the
P.L. 115-97.
the disposition.
amount withheld. If two or more persons
The withholding rate on Part II, Line 5c,
are joint transferees, each is obligated to
has changed from 35% to 21% for
For information about:
withhold. However, the obligation of each
distributions made after December 31,
Withholding at 21% (35% for
will be met if one of the joint transferees
2017.
distributions made before January 1,
withholds and transmits the required
2018), see
Entities Subject to Section
General Instructions
amount to the IRS.
1445(e), later.
Withholding at a reduced amount, see
Do not use Forms 8288 and 8288-A for
Purpose of Form
Purchase of residence for $1,000,000 or
the following distributions.
less.
Section 1445 withholding. A
1. A distribution of effectively
withholding obligation under section 1445
connected income by a publicly traded
For information about applying for
is generally imposed on the buyer or other
partnership is subject to the withholding
reduction or elimination of withholding see
transferee (withholding agent) when a
requirements of section 1446.
Withholding certificate issued by the
IRS,
U.S. real property interest is acquired from
later.
2. A distribution with respect to gains
a foreign person. The withholding
from the disposition of a U.S. real property
Joint transferors. If one or more foreign
obligation also applies to foreign and
interest from a trust that is regularly traded
persons and one or more U.S. persons
domestic corporations, qualified
on an established securities market is
jointly transfer a U.S. real property
investment entities, and the fiduciary of
subject to section 1445, but is not reported
interest, you must determine the amount
certain trusts and estates. This
on Forms 8288 and 8288-A.
subject to withholding in the following
withholding serves to collect U.S. tax that
manner.
3. A dividend distribution by a
may be owed by the foreign person. Use
qualified investment entity to a
1. Allocate the amount realized from
Form 8288 to report and transmit the
nonresident alien or a foreign corporation
the transfer among the transferors based
amount withheld.
that is attributable to gains from sales or
on their capital contribution to the
If an exception applies, you may
exchanges by the qualified investment
property. For this purpose, a husband and
be required to withhold at a
entity of U.S. real property interests is not
TIP
wife are treated as having contributed
reduced rate, or you may not be
subject to withholding under section 1445
50% each.
required to withhold. See Exceptions,
as a gain from the sale or exchange of a
2. Withhold on the total amount
later.
U.S. real property interest if:
allocated to foreign transferors.
a. The distribution is on stock
Section 1446(f)(1) withholding. When
3. Credit the amount withheld among
regularly traded on a securities market in
a transferor disposes of an interest in a
the foreign transferors as they mutually
the United States, and
partnership, section 1446(f)(1) imposes a
agree. The transferors must request that
b. The alien or corporation did not
withholding obligation on the buyer or
the withholding be credited as agreed
own more than 10% (for dispositions and
other transferee of the interest if:
upon by the 10th day after the date of
distributions before December 17, 2015,
transfer. If no agreement is reached, credit
1. The transferor is a foreign person;
did not own more than 5% of such stock in
May 16, 2018
Cat. No. 57528F
Instructions for Form 8288
Department of the Treasury
Internal Revenue Service
(Rev. May 2018)
(Use with the April 2018 revision of Form 8288.)
U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real
Property Interests
2. The transferor realized a gain on
the case of a real restate investment trust
Section references are to the Internal Revenue
Code unless otherwise noted.
the sale; and
(REIT)) of that stock at any time during the
1-year period ending on the date of the
3. Any portion of the gain would be
Future Developments
distribution.
treated under section 864(c)(8) as
For the latest information about
effectively connected with the conduct of a
Use Form 1042, and Form 1042-S, to
developments related to Form 8288 and
trade or business within the United States.
report and pay over the withheld amounts.
its instructions, such as legislation
These instructions do not include
enacted after they were published, go to
Section 1446(f)(1) withholding.
the specific rules for withholding,
!
IRS.gov/form8288.
Transferees are required to report the
payment, and reporting under
section 1446(f)(1) tax withheld on Form
CAUTION
What's New
section 1446(f)(1), nor do the instructions
8828, and related information on Form
cover the specific exceptions to that
8288-A. Form more information, see
We made the following changes to the
withholding. See
Notice 2018-29
for these
Notice
2018-29.
prior version of Form 8288.
rules and the instructions for completing
To meet your withholding, payment,
Amount To Withhold
Forms 8288 and 8288-A.
and reporting requirements under new
Generally, you must withhold 15% of the
section 1446(f)(1), use Forms 8288 and
Who Must File
amount realized on the disposition by the
8288-A. Follow the instructions outlined in
transferor (see Definitions, later).
A buyer or other transferee of a U.S. real
Notice 2018-29, 2018-16 I.R.B. 495
property interest, and a corporation,
available at
IRS.gov/irb/
Note. Prior to February 17, 2016, the
qualified investment entity, or fiduciary
2018-16_IRB#NOT-2018-29. New section
transferor was generally required to
that is required to withhold tax, must file
1446(f)(1) was added by section 13501 of
withhold 10% of the amount realized on
Form 8288 to report and transmit the
P.L. 115-97.
the disposition.
amount withheld. If two or more persons
The withholding rate on Part II, Line 5c,
are joint transferees, each is obligated to
has changed from 35% to 21% for
For information about:
withhold. However, the obligation of each
distributions made after December 31,
Withholding at 21% (35% for
will be met if one of the joint transferees
2017.
distributions made before January 1,
withholds and transmits the required
2018), see
Entities Subject to Section
General Instructions
amount to the IRS.
1445(e), later.
Withholding at a reduced amount, see
Do not use Forms 8288 and 8288-A for
Purpose of Form
Purchase of residence for $1,000,000 or
the following distributions.
less.
Section 1445 withholding. A
1. A distribution of effectively
withholding obligation under section 1445
connected income by a publicly traded
For information about applying for
is generally imposed on the buyer or other
partnership is subject to the withholding
reduction or elimination of withholding see
transferee (withholding agent) when a
requirements of section 1446.
Withholding certificate issued by the
IRS,
U.S. real property interest is acquired from
later.
2. A distribution with respect to gains
a foreign person. The withholding
from the disposition of a U.S. real property
Joint transferors. If one or more foreign
obligation also applies to foreign and
interest from a trust that is regularly traded
persons and one or more U.S. persons
domestic corporations, qualified
on an established securities market is
jointly transfer a U.S. real property
investment entities, and the fiduciary of
subject to section 1445, but is not reported
interest, you must determine the amount
certain trusts and estates. This
on Forms 8288 and 8288-A.
subject to withholding in the following
withholding serves to collect U.S. tax that
manner.
3. A dividend distribution by a
may be owed by the foreign person. Use
qualified investment entity to a
1. Allocate the amount realized from
Form 8288 to report and transmit the
nonresident alien or a foreign corporation
the transfer among the transferors based
amount withheld.
that is attributable to gains from sales or
on their capital contribution to the
If an exception applies, you may
exchanges by the qualified investment
property. For this purpose, a husband and
be required to withhold at a
entity of U.S. real property interests is not
TIP
wife are treated as having contributed
reduced rate, or you may not be
subject to withholding under section 1445
50% each.
required to withhold. See Exceptions,
as a gain from the sale or exchange of a
2. Withhold on the total amount
later.
U.S. real property interest if:
allocated to foreign transferors.
a. The distribution is on stock
Section 1446(f)(1) withholding. When
3. Credit the amount withheld among
regularly traded on a securities market in
a transferor disposes of an interest in a
the foreign transferors as they mutually
the United States, and
partnership, section 1446(f)(1) imposes a
agree. The transferors must request that
b. The alien or corporation did not
withholding obligation on the buyer or
the withholding be credited as agreed
own more than 10% (for dispositions and
other transferee of the interest if:
upon by the 10th day after the date of
distributions before December 17, 2015,
transfer. If no agreement is reached, credit
1. The transferor is a foreign person;
did not own more than 5% of such stock in
May 16, 2018
Cat. No. 57528F
the withholding by evenly dividing it
copy of Form 8288-A will not be provided
A qualified foreign pension fund or any
among the foreign transferors.
to the transferor if the transferor’s TIN is
entity wholly owned by such fund that
not included on that form. The IRS will
disposes U.S. real property interest or
When To File
send a letter to the transferor requesting
receives a distribution from a REIT is not a
the TIN and providing instructions for how
foreign person. See sections 897(l) and
A transferee must file Form 8288 and
to get a TIN. When the transferor provides
1445(f)(3) for more information.
transmit the tax withheld to the IRS by the
the IRS with a TIN, the IRS will provide the
20th day after the date of transfer.
U.S. real property interest. Any interest,
transferor with a stamped Copy B of Form
other than an interest solely as a creditor,
You must withhold even if an
8288-A.
in:
application for a withholding certificate is
Penalties
or has been submitted to the IRS on the
1. Real property located in the United
date of transfer. However, you do not have
States or the U.S. Virgin Islands.
Under section 6651, penalties apply for
to file Form 8288 and transmit the
failure to file Form 8288 when due and for
2. Certain personal property
withholding until the 20th day after the day
failure to pay the withholding when due. In
associated with the use of real property.
the IRS mails you a copy of the
addition, if you are required to but do not
3. A domestic corporation, unless it is
withholding certificate or notice of denial.
withhold tax under section 1445, the tax,
shown that the corporation was not a U.S.
But, if the principal purpose for filing the
including interest, may be collected from
real property holding corporation during
application for a withholding certificate
you. Under section 7202, you may be
the previous 5 years (or during the period
was to delay paying the IRS the amount
subject to a penalty of up to $10,000 for
in which the transferor held the interest, if
withheld, interest and penalties will apply
willful failure to collect and pay over the
shorter).
to the period beginning on the 21st day
tax. Corporate officers or other
after the date of transfer and ending on the
responsible persons may be subject to a
A U.S. real property interest does not
day full payment is made.
penalty under section 6672 equal to the
include:
amount that should have been withheld
Installment payments. You must
1. An interest in a domestically
and paid over to the IRS.
withhold the full amount at the time of the
controlled qualified investment entity.
first installment payment. If you cannot
Definitions
2. An interest in a REIT that is held by
because the payment does not involve
a qualified shareholder. For the definition
Transferee. Any person, foreign or
sufficient cash or other liquid assets, you
of a qualified shareholder, see section
domestic, that acquires a U.S. real
may obtain a withholding certificate from
897(k)(3). But see section 897(k)(2)(B) for
property interest by purchase, exchange,
the IRS. See the Instructions for Form
the cut-back rule if the qualified
gift, or any other transfer.
8288-B for more information.
shareholder has one or more applicable
investors.
Where To File
Transferor. For purposes of this
withholding, this means any foreign
3. An interest in a corporation that:
Send Form 8288 with the amount
person that disposes of a U.S. real
Did not hold any U.S. real property
withheld, and copies A and B of Form(s)
property interest by sale, exchange, gift, or
interest as of the date the interest in such
8288-A to:
any other disposition. A disregarded entity
corporation is disposed,
cannot be the transferor for purposes of
Has disposed of all its U.S. real
Ogden Service Center
section 1445. Instead, the person
property interests in transactions in which
P.O. Box 409101
considered as owning the assets of the
the full amount of any gain was recognized
Ogden, UT 84409
disregarded entity for federal tax purposes
as provided in section 897(c)(1)(B), and
is regarded as the transferor. A
Neither such corporation nor any
Forms 8288-A Must Be
disregarded entity for these purposes
predecessor of such corporation was a
Attached
means an entity that is disregarded as an
REIT or a RIC at any time during the
entity separate from its owner under
shorter of the previous 5 years or the
Anyone who completes Form 8288 must
Regulations section 301.7701-3, a
period in which the transferor held the
also complete a Form 8288-A for each
qualified real estate investment trust
interest.
person subject to withholding. Copies A
subsidiary as defined in section 856(i), or
and B of Form 8288-A must be attached to
4. An interest in certain publicly traded
a qualified subchapter S subsidiary under
Form 8288. Copy C is for your records.
corporations, partnerships, and trusts.
section 1361(b)(3)(B).
Multiple Forms 8288-A related to a
See Regulations sections 1.897-1 and
transaction can be filed with one Form
Qualified substitute. For this purpose, a
1.897-2 for more information. Also see
8288. You are not required to furnish a
qualified substitute is (a) the person
Transferred property that is not a U.S. real
copy of Form 8288 or 8288-A directly to
(including any attorney or title company)
property
interest, later.
the transferor.
responsible for closing the transaction,
other than the transferor’s agent, and (b)
Qualified investment entity (QIE). A
The IRS will stamp Copy B of each
the transferee’s agent.
QIE is:
Form 8288-A and will forward the stamped
Any REIT, and
copy to the foreign person subject to
Withholding agent. For purposes of this
Any RIC which is a U. S. real property
withholding at the address shown on Form
return, this means the buyer or other
holding corporation or which would be a
transferee who acquires a U.S. real
8288-A. To receive credit for the withheld
U. S. real property holding corporation.
property interest from a foreign person.
amount, the transferor generally must
In determining if a RIC is a U.S. real
attach the stamped Copy B of Form
Foreign person. A nonresident alien
property holding corporation, the RIC is
8288-A to a U.S. income tax return (for
individual, a foreign corporation that does
required to include as U.S. real property
example, Form 1040NR or 1120-F) or
not have a valid election under section
interests its holdings of stock in a RIC or
application for early refund filed with the
897(i) to be treated as a domestic
REIT that is a U.S. real property holding
IRS.
corporation, a foreign partnership, a
company, even if such stock is regularly
Transferor's TIN missing. If you do not
foreign trust, or a foreign estate. A resident
traded and the RIC did not own more than
alien individual is not a foreign person.
have the transferor's taxpayer
10% of such stock in the case of a REIT
identification number (TIN), you still must
(5% for dispositions before December 17,
file Forms 8288 and 8288-A. A stamped
Instructions for Form 8288 (Rev. 5-2018)
-2-
2015) or 5% of such stock in case of a
contract), a good-faith deposit, or any
If you receive a certification (or
RIC, and even if such stock is
similar amount primarily intended to bind
statement), the withholding tax cannot be
domestically controlled.
the parties to the contract and subject to
collected from you unless you knew that
forfeiture. A payment that is not forfeitable
the certification (or statement) was false or
For more information, see Pub. 515.
may also be considered earnest money, a
you received a notice from your agent, the
Domestically controlled QIE. A QIE is
good-faith deposit, or a similar sum.
transferor’s agent, or the qualified
domestically controlled if at all times
substitute that it was false. The
Exceptions
during the testing period less than 50% in
certification must be signed by the
value of its stock was held, directly or
individual, a responsible officer of a
Withholding At a Reduced Rate
indirectly, by foreign persons. The testing
corporation, a general partner of a
period is the shorter of:
Purchase of residence for $1,000,000
partnership, or the trustee, executor, or
The 5-year period ending on the date of
or less. Withholding is required at a
fiduciary of a trust or estate.
the disposition (or distribution), or
reduced rate of 10% in the case of a
A disregarded entity may not certify
The period during which the entity was
disposition of:
that it is the transferor for U.S. tax
in existence.
A property which is acquired by the
purposes. Rather, the owner of the
transferee for use by the transferee as a
For purpose of determining whether a
disregarded entity is treated as the
residence, and
QIE is domestically controlled, the
transferor of the property and must
The amount realized for the property is
following rules apply.
provide the certificate of nonforeign status
$1,000,000 or less. However, see
to avoid withholding under section 1445.
1. A person holding less than 5% of
Purchase of residence for $300,000 or
any class of stock of a QIE which is
A foreign corporation electing to be
less next.
regularly traded on an established
treated as a domestic corporation under
securities market in the United States at all
section 897(i) must attach to the
Withholding Not Required
times during the testing period will be
certification a copy of the
treated as a U.S. person unless the QIE
acknowledgment of the election received
Purchase of residence for $300,000 or
has actual knowledge that such person is
from the IRS. The acknowledgment must
less. If one or more individuals acquire
not a U.S. person.
state that the information required by
U.S. real property for use as a residence
Regulations section 1.897-3 has been
2. Any stock in a QIE that is held by
and the amount realized (in most cases
determined to be complete. If the
another QIE will be treated as held by a
the sales price) is $300,000 or less, no
acknowledgment is not attached, you may
foreign person if:
withholding is required.
not rely on the certification. Keep any
Any class of stock of such other QIE is
A U.S. real property interest is acquired
certification of nonforeign status you
regularly traded on an established
for use as a residence if you or a member
receive in your records for 5 years after
securities market, or
of your family has definite plans to reside
the year of transfer.
Such other QIE is a RIC that issues
in the property for at least 50% of the
certain redeemable securities.
You may also use other means to
number of days the property is used by
determine that the transferor is not a
Notwithstanding the above, the stock of
any person during each of the first two
foreign person. But if you do, and it is later
the QIE will be treated as held by a U.S.
12-month periods following the date of
determined that the transferor is a foreign
person if such other QIE is domestically
transfer. Do not take into account the
person, the withholding tax may be
controlled.
number of days the property will be vacant
collected from you.
3. Stock in a QIE that is held by any
in making this determination. No form or
other document is required to be filed with
other QIE not described above will be
Late notice of false certification. If,
the IRS for this exception; however, if you
treated as held by a U.S. person in
after the date of transfer, you receive a
do not in fact use the property as a
proportion to the stock ownership of such
notice from your agent, the transferor’s
residence, the withholding tax may be
other QIE which is (or is treated as) held
agent, or the qualified substitute that the
collected from you.
by a U.S. person.
certification of nonforeign status is false,
you do not have to withhold on
This exception applies whether or not
Amount realized. The sum of the cash
the transferor (seller) is an individual,
consideration paid before you received
paid or to be paid (not including interest or
partnership, trust, corporation, or other
the notice. However, you must withhold
original issue discount), the fair market
the full 15% of the amount realized from
transferor. However, this exception does
value of other property transferred or to be
any consideration that remains to be paid,
not apply if the actual transferee (buyer) is
transferred, and the amount of any liability
not an individual, even if the property is
if possible. You must do this by
assumed by the transferee or to which the
acquired for an individual.
withholding and paying over the entire
U.S. real property interest is subject
amount of each successive payment of
Transferor not a foreign person.
immediately before and after the transfer.
consideration until the full 15% has been
Generally, no withholding is required if you
Generally, the amount realized for
withheld and paid to the IRS. These
receive a certification of nonforeign status
purposes of this withholding is the sales or
amounts must be reported and transmitted
from the transferor, signed under penalties
contract price.
to the IRS by the 20th day following the
of perjury, stating that the transferor is not
date of each payment.
Date of transfer. The first date on which
a foreign person and containing the
consideration is paid or a liability is
transferor’s name, address, and
Transferred property that is not a U.S.
assumed by the transferee. However, for
identification number (social security
real property interest. If you acquire an
purposes of sections 1445(e)(2), (3), and
interest in property that is not a U.S. real
number (SSN) or employer identification
(4), and Regulations sections 1.1445-5(c)
property interest (defined under
U.S. real
number (EIN)). The transferor can give the
(1)(iii) and 1.1445-5(c)(3), the date of
property
interest, earlier), withholding
certification to a qualified substitute
transfer is the date of distribution that
(defined on this page). The qualified
generally is not required. A U.S. real
creates the obligation to withhold.
substitute gives you a statement, under
property interest includes certain interests
Payment of consideration does not include
in U.S. corporations, as well as direct
penalties of perjury, that the certification is
the payment before passage of legal or
interests in real property and certain
in the qualified substitute’s possession.
equitable title of earnest money (other
associated personal property.
than pursuant to an initial purchase
Instructions for Form 8288 (Rev. 5-2018)
-3-
No withholding is required on the
distribution of a U.S. real property interest
Withholding certificate issued by the
acquisition of an interest in a domestic
only because an interest in the entity was
IRS. A withholding certificate may be
corporation if (a) any class of stock of the
disposed of in an applicable wash sale
issued by the IRS to reduce or eliminate
corporation is regularly traded on an
transaction, withholding generally is not
withholding on dispositions of U.S. real
established securities market, or (b) the
required. See section 897(h)(5).
property interests by foreign persons.
transferee receives a statement issued by
Either a transferee or transferor may apply
the corporation that the interest is not a
Late Filing of Certification or
for the certificate. The certificate may be
U.S. real property interest, unless you
issued if:
Notices
know that the statement is false or you
Reduced withholding is appropriate
receive a notice from your agent or the
You may be eligible for relief for a late
because the 10%, 15%, or 21% (35% for
transferor’s agent that the statement is
filing if a statement or notice was not
distributions made before January 1,
false. A corporation’s statement may be
provided to the relevant person or the IRS
2018) amount exceeds the transferor’s
relied on only if it is dated not more than
by the specified deadline and if you have
maximum tax liability;
30 days before the date of transfer.
reasonable cause for the failure to make a
The transferor is exempt from U.S. tax
timely filing. Once you become aware that
or nonrecognition provisions apply; or
Late notice of false statement. If,
you have failed to timely file certain
The transferee or transferor enters into
after the date of transfer, you receive a
certificates or notices, you must file the
an agreement with the IRS for the
notice indicating that the statement is
required certification or notice with the
payment of the tax.
false, see
Late notice of false
certification,
appropriate person or the IRS. Also
earlier.
An application for a withholding
include the following.
certificate must comply with the provisions
Generally, no withholding is required
A statement at the top of the
of Regulations sections 1.1445-3 and
on the acquisition of an interest in a
document(s) that it is “FILED PURSUANT
1.1445-6, and Rev. Proc. 2000-35,
foreign corporation. However, withholding
TO REV. PROC. 2008-27.”
2000-35 I.R.B. 211. You can find Rev.
may be required if the foreign corporation
An explanation describing why the
Proc. 2000-35 at
IRS.gov/pub/irs-irbs/
has made the election under section
failure was due to reasonable cause.
irb00-35.pdf. In certain cases, you may
897(i) to be treated as a domestic
Within the explanation, provide that you
use Form 8288-B to apply for a
corporation.
filed with, or obtained from, an appropriate
withholding certificate. The IRS will
person the required certification or notice.
Transferor’s nonrecognition of gain or
normally act on an application by the 90th
loss. You may receive a notice from the
day after a complete application is
The completed certification or notice
transferor signed under penalties of
received.
attached to the explanation must be sent
perjury stating that the transferor is not
If you receive a withholding certificate
to:
required to recognize gain or loss on the
from the IRS that excuses withholding,
transfer because of a nonrecognition
Ogden Service Center
you are not required to file Form 8288.
provision of the Internal Revenue Code
P.O. Box 409101
However, if you receive a withholding
(see Temporary Regulations section
Ogden, UT 84409
certificate that reduces (rather than
1.897-6T(a)(2)) or a provision in a U.S. tax
eliminates) withholding, there is no
treaty. You may rely on the transferor’s
exception to withholding, and you are
For more information, see Rev. Proc.
notice, and not withhold, unless (a) only
required to file Form 8288. Attach a copy
2008-27, 2008-21 I.R.B. 1014, available at
part of the gain qualifies for
of the withholding certificate to Form 8288.
IRS.gov/irb/2008-21_IRB.
nonrecognition, or (b) you know or have
See
When To
File, earlier, for more
reason to know that the transferor is not
Liability of Agents
information.
entitled to the claimed nonrecognition
If you (or the qualified substitute) received
treatment.
No consideration paid. Withholding is
(a) a transferor’s certification of nonforeign
not required if the amount realized by the
No particular form is required for this
status, or (b) a corporation’s statement
transferor is zero (for example, the
notice. By the 20th day after the date of
that an interest is not a U.S. real property
property is transferred as a gift and the
transfer, you must send a copy of the
interest, and the transferee’s or
recipient does not assume any liabilities or
notice of nonrecognition (with a cover
transferor’s agent, or the substitute, knows
furnish any other consideration to the
letter giving your name, address, and
the document is false, the agent (or
transferor).
identification number) to:
substitute) must notify you. If notification is
Options to acquire U.S. real property
not provided, the agent (or substitute) will
Ogden Service Center
interests. No withholding is required with
be liable for the tax that should have been
P.O. Box 409101
respect to any amount realized by the
withheld, but only to the extent of the
Ogden, UT 84409
grantor on the grant or lapse of an option
agent’s (or substitute’s) compensation
to acquire a U.S. real property interest.
from the transaction.
See Regulations section 1.1445-2(d)(2)
However, withholding is required on the
If you (or the substitute) receive a
for more information on the transferor’s
sale, exchange, or exercise of an option.
notice of false certification or statement
notice of nonrecognition.
Property acquired by a governmental
from your agent, the transferor’s agent, or
unit. If the property is acquired by the
qualified substitute, you must withhold tax
Note. A notice of nonrecognition cannot
United States, a U.S. state or possession
as if you had not received a certification or
be used for the exclusion from income
or political subdivision, or the District of
statement. See
Late notice of false
under section 121, like-kind exchanges
Columbia, withholding is generally not
certification, earlier.
that do not qualify for nonrecognition
required.
treatment in their entirety, and deferred
An “agent” is any person who
like-kind exchanges that have not been
For rules that apply to foreclosures, see
represents the transferor or transferee in
completed when it is time to file Form
Regulations section 1.1445-2(d)(3).
any negotiation with another person (or
8288. In these cases, a withholding
another person’s agent) relating to the
Applicable wash sale transaction. If a
certificate issued by the IRS, as described
distribution from a domestically controlled
transaction or in settling the transaction.
next, must be obtained.
For purposes of section 1445(e), a
qualified investment entity is treated as a
transferor’s or transferee’s agent is any
Instructions for Form 8288 (Rev. 5-2018)
-4-
person who represents or advises an
may be collected from the entity or
withhold 21% (35% for distributions made
entity, a holder of an interest in an entity,
fiduciary.
before January 1, 2018) of the gain
or a fiduciary with respect to the planning,
recognized by the corporation. No
Section 1445(e)(1)
arrangement, or completion of a
withholding or reduced withholding is
Transactions
transaction described in sections 1445(e)
required if the corporation receives a
(1) through (4).
withholding certificate from the IRS.
Partnerships. A domestic partnership
Section 1445(e)(3)
that is not publicly traded must withhold
A person is not treated as an agent if
tax under section 1446 on effectively
the person only performs one or more of
Transactions
connected income allocated to its foreign
the following acts in connection with the
Generally, a domestic corporation that
partners and must file Form 8804, and
transaction:
distributes any property to a foreign
Form 8805. A publicly traded partnership
1. Receiving and disbursing any part
person that holds an interest in the
or nominee generally must withhold tax
of the consideration.
corporation must withhold 15% (10% for
under section 1446 on distributions to its
distributions before February 17, 2016) of
2. Recording any document.
foreign partners and must file Forms 1042
the fair market value of the property
and 1042-S. Because a domestic
3. Typing, copying, and other clerical
distributed if:
partnership that disposes of a U.S. real
tasks.
The foreign person’s interest in the
property interest is required to withhold
4. Obtaining title insurance reports
corporation is a U.S. real property interest
under section 1446, it is not required to
and reports concerning the condition of
under section 897; and
withhold under section 1445(e)(1).
the property.
The property is distributed in
Trusts and estates. If a domestic trust or
5. Transmitting documents between
redemption of stock under section 302, in
estate disposes of a U.S. real property
the parties.
liquidation of the corporation under
interest, the amount of gain realized must
sections 331 through 341, or with respect
6. Functioning exclusively in his or her
be paid into a separate “U.S. real property
to stock under section 301 that is not
capacity as a representative of a
interest account.” For these purposes, a
made out of the earnings and profits of the
condominium association or cooperative
domestic trust is one that does not make
corporation.
housing corporation. This exemption
the “large trust election” (explained
includes the board of directors, the
No withholding or reduced withholding
below), is not a qualified investment entity,
committee, or other governing body.
is required if the corporation receives a
and is not publicly traded. The fiduciary
withholding certificate from the IRS.
Entities Subject to Section
must withhold 21% (35% for distributions
made before January 1, 2018) of the
Section 1445(e)(4)
1445(e)
amount distributed to a foreign person
Transactions
Withholding is required on certain
from the account during the tax year of the
distributions and other transactions by
No withholding is required under section
trust or estate in which the disposition
domestic or foreign corporations, qualified
1445(e)(4), relating to certain taxable
occurred. The withholding must be paid
investment entities, trusts, and estates. A
distributions by domestic or foreign
over to the IRS within 20 days of the date
domestic trust or estate must withhold
partnerships, trusts, and estates, until the
of distribution. Special rules apply to
21% (35% for distributions made before
effective date of a Treasury Decision
grantor trusts. See Regulations section
January 1, 2018) of the amount distributed
under section 897(e)(2)(B)(ii) and (g).
1.1445-5 for more information and how to
to a foreign beneficiary from a “U.S. real
compute the amount subject to
Section 1445(e)(5)
property interest account” that it is
withholding.
Transactions
required to establish under Regulations
Large trust election. Trusts with
section 1.1445-5(c)(1)(iii). A foreign
The transferee of a partnership interest
more than 100 beneficiaries may make an
corporation that has not made the election
must withhold 15% (10% for dispositions
election to withhold upon distribution
under section 897(i) must withhold 21%
before February 17, 2016) of the amount
rather than at the time of transfer. The
(35% for distributions made before
realized on the disposition by a foreign
amount to be withheld from each
January 1, 2018) of the gain it recognizes
partner of an interest in a domestic or
distribution is 21% (35% for distributions
on the distribution of a U.S. real property
foreign partnership in which at least 50%
made before January 1, 2018) of the
interest to its shareholders. Certain
of the value of the gross assets consists of
amount attributable to the foreign
domestic corporations are required to
U.S. real property interests and at least
beneficiary’s proportionate share of the
withhold tax on distributions to foreign
90% of the value of the gross assets
current balance of the trust’s section
shareholders.
consists of U.S. real property, interests
1445(e)(1) account. This election does not
plus any cash or cash equivalents.
No withholding is required on the
apply to any qualified investment entity or
However, no withholding is required under
transfer of an interest in a domestic
to any publicly traded trust. Special rules
section 1445(e)(5) for dispositions of
corporation if any class of stock of the
apply to large trusts that make recurring
interests in other partnerships, trusts, or
corporation is regularly traded on an
sales of growing crops and timber.
estates until the effective date of a
established securities market. Also, no
A trust’s section 1445(e)(1) account is
Treasury Decision under section 897(g).
withholding is required on the transfer of
the total net gain realized by the trust on
No withholding is required if, no earlier
an interest in a publicly traded partnership
all section 1445(e)(1) transactions after
than 30 days before the transfer, the
or trust.
the date of the election, minus the total of
transferee receives a statement signed by
all distributions made by the trust after the
No withholding will be required with
a general partner under penalties of
date of the election from such total net
respect to an interest holder if the entity or
perjury that at least 50% of the value of the
gain. See Regulations section 1.1445-5(c)
fiduciary receives a certification of
gross assets of the partnership does not
(3) for more information.
nonforeign status from the interest holder.
consist of U.S. real property interests or
An entity or fiduciary may also use other
that at least 90% of the value of the gross
Section 1445(e)(2)
means to determine that an interest holder
assets does not consist of U.S. real
Transactions
is not a foreign person, but if it does so
property interests, plus cash or cash
A foreign corporation that distributes a
and it is later determined that the interest
equivalents. The transferee may rely on
U.S. real property interest must generally
holder is a foreign person, the withholding
the statement unless the transferee knows
Instructions for Form 8288 (Rev. 5-2018)
-5-
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