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Disposition of Real Property (FIRPTA)


In 1980, Congress enacted the Foreign Investment in U.S. Real Property Tax Act of 1980 (FIRPTA) which added IRC 897 and treated gain or loss on the disposition of USRPI by a foreign corporation or a nonresident alien (NRA) as effectively connected with a U.S. trade or business. In 1984, the FIRPTA withholding tax regime under IRC 1445 was enacted under the Deficit Reduction Act of 1984 (Pub. L. 98-369). IRC 1445 generally requires the buyer/transferee to withhold 15 percent (10 percent for dispositions before February 17, 2016) of the amount realized from the disposition of a USRPI by a foreign person or 35 percent of the gain on certain dispositions of USRPIs. Gain or loss from the disposition of U.S. real property or stock of a U.S. real property holding corporation (as defined in IRC 897(c)) is U.S. source income. Gain from the sale of real property located outside the United States is foreign source income. See Page 3 See Page 13