A foreign person (non-U.S. citizen, non-resident alien) sells a California investment property for $500,000. The buyer does not intend to use the property as a personal residence. What is the applicable FIRPTA withholding rate?
Correct Answer
A) 15%, because the standard FIRPTA rate applies when the buyer does not qualify for the residence-use exception
The standard FIRPTA withholding rate is 15% of the gross sales price under IRC §1445. A reduced rate of 10% is available only when the sales price is $1,000,000 or less AND the buyer executes an affidavit stating they intend to use the property as a personal residence. Because the buyer in this scenario does not intend to use the property as a residence, the 10% exception does not apply, and the full 15% rate governs.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Intestate succession is the legal process by which a deceased person's property is distributed according to state law when they die without a valid will. State statutes determine the order of inheritance.
Marketable title is title that is free from reasonable doubt as to who the owner is and free from liens, encumbrances, or defects that would cause a reasonable buyer to hesitate before purchasing. It is also known as merchantable title.
Probate is the legal process by which a deceased person's will is validated by the court and their estate is administered, including the transfer of real property to the named beneficiaries or heirs.
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A buyer is purchasing a home in San Diego for $650,000. The buyer is putting 20% down and obtaining a 30-year fixed mortgage at 6.5% annual interest. The lender requires the buyer to prepay the first month's interest at closing. What is the prepaid interest amount for one month?
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A California escrow officer is compiling the closing documents for a residential sale. Which of the following is NOT typically handled by the escrow holder during the closing process?