There are a lot of benefits available to real estate investors, both foreign and domestic, through the 1031 Exchange. The ability to defer all taxes in real estate transactions is a gift from the IRS. What happens when one party in the transaction is a not a US Citizen? How does that affect the transaction? How does that affect the 1031 Exchange?
The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) states that if you purchase real estate from a non-US Citizen, or “foreign person”, you as the buyer are required to withhold 10% of the amount realized from the sale. In this episode of Skyline Views, I sit down with a seasoned and highly educated Qualified Intermediary to discuss FIRPTA and its relationship with 1031 Exchanges. What should you be aware of as a US Citizen buying from a foreign investor? What should you as a foreign investor be aware of planning out your investment strategy in the US?
My guest Dave Foster is a degreed accountant, QI, and serial real estate investor. He has decades of experience helping investors like you maximize their returns through tax saving strategies.
Key Points:
Dave recounts how he got his start (0:43)
What is FIRPTA? How does it affect foreign investors? (4:30)
Buyer’s liability in buying from non-US Citizens (7:16)
1031 Exchange statute that affects FIRPTA (9:31)
How the simultaneous 1031 Exchange benefits foreign investors (11:36)
Market that FIRPTA and foreign investment has created in the United States (13:15)
Calculations foreign investors need to do ahead of time (15:24)
Calculating benefits and fees between principal, profits, and returns (18:24)
Resources:
Dave’s Site - https://www.the1031investor.com/
IRS Video on FIRPTA - https://www.irsvideos.gov/Individual/education/FIRPTA
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Learn more about The Haney Company here – https://www.thehaneycompany.com/
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