21.8.5. Miscellaneous Foreign Investment in Real Property Tax Act (FIRPTA) Related Issues

(1) Employees in the Accounts Management (AM) organization respond to telephone calls and taxpayer correspondence, process claims, certain applications and other internal adjustment requests.

(2) This IRM provides guidance to Accounts Management employees assigned to work Form 8288-B, Application for Withholding Certificate for Disposition by Foreign Persons of U.S. Real Property Interests, along with other miscellaneous FIRPTA issues.

(1) Information about authorities delegated to Accounts Management can be found in IRM 1.2.61.2, Current TS Division Delegations of Authority.

(1) IRM 1.1.13.7.3, Accounts Management (AM) provides information about roles and responsibilities in AM.

(2) IRM 21.1.1, Accounts Management and Compliance Services Overview provides responsibility guidance to AM employees.

(1) IRM 1.4.16, Accounts Management Guide for Managers provides guidance for program management and review of programs assigned to AM.

(1) The current year Accounts Management Program Letter, Measures and Operating Guidelines.

(2) IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS), and Electronic Products and Services Support.

(1) You can review acronyms used in Exhibit 21.8.5-2.

(1) Use the following list of publications and Internal Revenue Codes (IRC) as related resources

• Pub 515, Withholding of Tax on Nonresident Aliens and Foreign Entities is used as a related resource

• Pub 523, Selling Your Home

• Pub 527, Residential Rental Property (Including Rental of Vacation Homes)

• Pub 535, Business Expenses

• Pub 544, Sales and Other Dispositions of Assets

• Pub 550, Investment Income and Expenses

• Pub 551, Basis of Assets

• IRC 897 , Disposition of investments in United States real property

• Pub 901, U.S. Tax Treaties

• IRC 1031, Exchanges of property held for productive use or investment

• IRC 1033, Involuntary Conversion

• IRC 1041, Transfers of property between spouses or incident to divorce

• IRC 1445, Withholding of tax on dispositions of United States real property interests

• IRC 1446, Withholding tax on foreign Partners' share of effectively connected income.

(1) In order for a Withholding Agent to withhold at a reduced rate at the date of transfer, a request for a withholding certificate must:

• Be submitted to the IRS prior to the Date of Transfer (DOT) of the United States real property interest (USRPI), or

• Be mailed to the IRS (postmarked) no later than the day of the transfer, and

• Contain the complete name, address, and U.S. TIN number of both the transferor (seller) and the transferee (buyer) involved in the transaction.

  Exception: Immediately forward the Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests, received with an original Form W-7, Application for IRS Individual Taxpayer Identification Number, or Form W-7 (SP), Application for IRS Individual Taxpayer Identification Number (Spanish Version) and supporting documentation to the Austin Submission Processing Campus (AUSPC) Individual Taxpayer Identification Number (ITIN) unit. The ITIN unit has 10 days to process the ITIN request. Upon completion of ITIN processing, the Form 8288-B (reflecting the assigned ITIN number) is transshipped to the Ogden Accounts Management Campus (OAMC) for processing. OAMC controls the case file and begins its processing.

  Note: If more than one person is listed as the transferor (seller), ensure an additional sheet is attached to Form 8288-B listing the name, address and TIN of any additional transferors (sellers). If not present, reject the Form 8288-B.

(2) If the request for a withholding certificate is submitted on or before the date of the transfer, the amount withheld or a lesser amount as determined by the Service, is reported and paid over to the Service by the 20th day following the issuance of the withholding certificate.

(3) If the request for a withholding certificate was NOT submitted on or prior to the date of transfer of the USRPI the withholding agent is required to withhold and remit the determined amount with the Form 8288 and Form 8288-A to the Ogden Submission Processing Center by the 20th day after the transfer date of the USRPI.

(4) When the taxpayer receives a withholding certificate which reduces or eliminates the required withholding amount, and a higher amount is already paid, the taxpayer may submit a written request for early refund under IRC 1445.

(1) The request for a withholding certificate can be submitted to the IRS in two formats:

• A Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests or

• A formal letter.

(2) All applicants must complete or have the following information before the withholding certificate can be issued.

• Transferor (seller) information - Contains the Taxpayer Identification Numbers (TIN), names and addresses of all transferors (sellers).

• Transferee (buyer) information - Contains the TIN, names and addresses of all transferees (buyers).

• Applicant designation - Identifies who filed the application.

• Withholding Agent - Contains the name and TIN of the withholding agent or other entity filing the application.

  Note: The withholding agent and transferee (buyer) are generally the same person.

• Withholding Certificate mailing address - Contains the complete address of where the withholding certificate is to be mailed.

• Description of transaction (type of interest) - Includes the date of transfer (DOT), contract price, type of interest transferred real property, associated personal property, and domestic U.S. real property holding corporation. Additionally, includes the use of property at time of sale (rental/commercial, personal, or other) and the adjusted basis.

• Location and Description of Property Address - Contains the address of the property being sold.

• Three Preceding Tax Years - Checkboxes - Where tax return was filed and were income taxes paid and amount.

• Checkbox A - Exemption from U.S. tax or nonrecognition or Checkbox B - Maximum tax liability is less than tax required to be withheld, and Checkbox C- Installment sales rules.

• Unsatisfied withholding liability under Section 1445 - Checkbox.

• Application for withholding certificate under Section 1445(e) - Checkbox. If yes, Line 9a and 9b must be checked.

(3) An application/letter must have the "Penalty of Perjury" statement signed by one of the responsible parties listed below:

• Individual

• Responsible officer, if a corporation

• General partner, if a partnership

• Trustee, executor, or equivalent, if a trust of estate

• Agent authorized by a general or specific power of attorney.

(4) Incomplete Form 8288-B: If, after review of Form 8288-B, it is determined more information is required from the applicant, issue database Letter 3319 Withholding Certificate - Request FMI, for the information. Prepare a Form 10022, Case History/Telephone Sheet or other history sheet designated by local management and suspend case for 30 days (45 days if there is a foreign address).

(1) Applicants for withholding certificates must include the category or the reason the request is being submitted.

1. Category 1: Applications for withholding certificates based on a claim the transferor (seller) is entitled to nonrecognition treatment or is exempt from tax. Additional requirements included in this category follow:
   a brief description of the transfer
   a brief summary of the law and facts supporting the claim of nonrecognition or exemption
   evidence the transferor (seller) has no unsatisfied withholding liability
   the Fair Market Value (FMV) or other "good faith" estimate of the property. No supporting evidence concerning the value of the property is required in the application.

2. Category 2: Applications for withholding certificates based solely on a calculation of the transferor's (seller's) maximum tax liability. The following additional requirements must be included. The applicant must include a calculation of the maximum tax (MTAX) that may be imposed on the disposition, including the following information.

Note: Refer to the second box below for distribution(s) in excess of Earnings and Profit (E&P)

Additional Requirements for MTAX Calculation
1. The amount realized by the transferor (seller) with evidence confirming this amount (such as a copy of the signed contract).
2. The adjusted basis of the property with evidence confirming the basis claimed. Example: Schedules of depreciation allowed for tax purposes during the period the property was held and/or settlement sheet when purchased.
3. Amounts recaptured with respect to accelerated depreciation, investment tax credit, or other items subject to recapture.
4. The maximum long-term capital gain tax rate for individuals is 20 percent. The corporate maximum capital gain tax rate is 21 percent. However, the transferor (seller) may also submit a draft copy (DO NOT PROCESS the DRAFT COPY) of their income tax return showing the ESTIMATED MAXIMUM TAX LIABILITY (EMTAXL). The estimated taxes may differ from the above- mentioned maximum tax rates. If so, allow the taxpayer's Maximum Tax Liability (MTAXL). See Treasury Regulation 1.1445-6(c).
5. Tentative tax owed.
6. Amount of any increase or decrease of tax to which the transferor (seller) is subject, including any reduction to which the transferor (seller) is entitled, under a provision of a U.S. income tax treaty, as well as evidence supporting the adjustment claimed.

Sufficient information for distribution(s) in excess of Earnings and Profit (E&P)

Amount of total distribution(s) U.S. E&P Available (amount treated as dividend, sec. 301(c)(1)) Excess Distribution after E&P (total distributions minus US E&P available) Shareholder basis Return of Capital (lesser of line 3 of this box, excess distribution after E&P, or line 4 of this box, shareholder basis, see sec. 301(c)(2)) Gain (If line 3 of this box, excess distribution after E&P, exceeds line 4 of this box, shareholder basis, see sec. 301(c)(3)) Tax rate on Gain Tax liability (Gain times tax rate on gain) Adjustments, if any, to the tax liability

3. Category 3: Applications for withholding certificates under the special installment sales rules. Generally, the transferee (buyer) is required to fully satisfy the withholding obligations based on the amount realized. However, when the applicant supplies the computation, as described under Category 2, the gain under the installment method can result in reduced withholding. Additional requirements included in this category follow:

Additional Requirements for Installment Sales
1. An agreement signed by the Transferee (Buyer) "under penalties of perjury" to withhold and pay the required tax.
2. Withhold and pay the correct percent of tax or such lesser amount, as determined by IRS, of any down payment, including any liabilities of the transferor (seller) assumed by the transferee (buyer).
3. Withhold the correct percent or such lessor amount of each subsequent payment.
4. Notify IRS prior to the disposition or encumbrance of the subject property and pay over, using Form 8288, U.S. Withholding Tax Return for Disposition by Foreign Persons of U.S. Real Property Interests, and Form 8288-A, Statement of Withholding on Dispositions b Foreign Persons of U.S. Real Property Interests to the Service the remaining amounts withheld.

Note: See IRM 21.8.5.4, Form 8288-B, Withholding Certificate: Background, for the correct percent of tax.

4. CATEGORIES 4, 5 OR 6 are not identified on Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests. Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, instructs the taxpayer to include a statement containing the information pertinent to the specific category for which they qualify.

5. Category 4: Application for withholding based on an agreement for the payment of tax. Include the following information to establish the transferor's (seller's) maximum tax liability, or the amount otherwise required to be withheld, a signed copy of the agreement proposed by the applicant, and a copy of the security instrument proposed by the applicant.

6. Category 5: Applications for blanket withholding certificates. A statement indicating a blanket withholding certificate is in affect which excuses withholding with respect to multiple disposition of property interest by the transferor (seller) during a period of no more than 12 months.

7. Category 6: Applications for withholding certificates based on any other basis. Information stated above for Category 4 must be included, along with a description of the nonconforming security, and a memorandum of law and facts establishing the proposed security is valid and enforceable and adequately protects the government's interest.

   Note: If the criteria for Category 4, 5 or 6 are identified, forward the document to the Ogden Campus, using Form 3210, Document Transmittal to:

Internal Revenue Service
Attn: Classification M/S 4160
1973 N. Rulon White Boulevard
Ogden, UT 84404

(1) The applications are mailed to:

Director, OSPC
Accounts Management Branch
PO Box 409101
Ogden, UT 84409

(2) The clerk must take the following actions:

1. Extract the applications from the envelopes and staple the envelope to the back of the application.

2. Stamp the received date on the application.

   Note: If Form 8288-B, Withholding Certificate Application is accompanied with an original Form W-7 andForm W-7SP application with supporting documentation, transship the original Form W-7 andForm W-7SP and supporting documentation to AUSPC ITIN unit for processing. Retain the copies of the Form 8288-B and supporting information necessary to process the Form 8288-B. Take no further action until notified by the ITIN unit that an ITIN is issued.

3. Determine if the forms are true processable applications or another type of inquiry.

4. Review Form 8288-B, and determine if the case is filed as a Category 4, 5, or 6. If so, then transship the application (see paragraph 3 below for complete instructions).

5. Control all Form 8288-B Certificates on the withholding certificate database to assign a control number and place in a file folder.

   Reminder: If multiple transferors (sellers) or transferees (buyers) are listed on the Form 8288-B, then input all other TINs in the remarks section.

(3) If the case is forwarded to the Ogden Examination Branch, process as follows:

1. Forward the case to the Examination Branch Attn: Classification M/S 4160, using Form 3210, Document Transmittal, noting the reason for the referral.

2. Control, monitor and keep all copies of Forms 3210 submitted and acknowledged by the Examination Branch.

(4) If the application is a Category 1, 2, or 3, then the case is worked in the Ogden Accounts Management (AM) Technical Team, Mail Stop 6731/6732. Begin assembling the Form 8288-B application case to include:

• Application

• Form 10022, Case History Sheet, (or other history sheet designated by local management).

• Copies of Form 8288-B and Form 8288-A, or Form 8288-C(if applicable).

• Control Number consists of the calendar year and a 5- digit sequential number (i.e., the first application received in 2024 will have a Foreign Investment Real Property Tax Act (FIRPTA) Control Number of "202400001").

• Enter the applicant's name, as it is stated on the application, on the left side of the case jacket.

• Document the FIRPTA Control Number on the application.

• Maintain the case file in numerical order within the unit.

(5) INTLWebApps Database - You must establish the case in the withholding certificate database using the following steps:

1. Log in and select "FIRPTA".

2. Select Form 8288-B.

3. Select search and enter the search criteria. Look for any duplicate cases. If a case is found, notate the file number, and provide the case to the assigned case worker. If no case is found continue creating a new case by following the remaining steps.

4. Select Form 8288-B.

5. Select "New" Form 8288-B.

6. On the "W/A" tab enter the input date, date of transfer, received date, withholding agent or fiduciary name and TIN. Click next.

7. On the "Transferor" tab (seller), enter the transferor information including name, TIN address, city, state, zip code, and the transferor’s country if available. This information is found on lines 4 and 5 of Form 8288-B. Click next.

8. On the "Transferee" tab (buyer), enter the transferee information including name, TIN address, city, state, zip code and transferee’s country if applicable. Click next.

9. On the "W/H Certificate" tab, enter the Real Property transaction description including location or property description, contract price, amount withheld or to be withheld on the sale. Check the required boxes indicating if taxes were paid or returns were filed.

10. Input the contact person’s IDRS number, name, telephone number and tour of duty (TOD). Click next.

    Note: The TOD must be input in a 4- digit military time code, ex. 0600 for 6:00 am or 1630 for 4:30 pm. If the time is not input in a 4- digit number, it will print out incorrectly on the letters.

11. Click Save and enter the control number the system generates on the case file.

(6) If an application is received with a Form 8288/ Form 8288-A, or Form 8288-C and payment, take the following actions:

1. Prepare Form 4287, Record of Discovered Remittances, for the payment and hand carry the return and payment to the Deposit activity function.

2. Enter action taken into the withholding certificate database.

(1) Review the application for completeness. If the application is complete, take these additional steps to perfect the application before entering the information in the database and issuing the withholding certificate.

(2) Review all supporting documentation for the application to determine the category on which the application is based.,

(3) Use the following table if the application is incomplete

(4) Net Operating Loss (NOL) Calculation: Special attention must be paid to cases where a NOL is claimed. For purposes of calculating the maximum tax imposed upon a disposition, only take NOLs into account if:

1. The transferor (seller) claiming the NOL was engaged in a trade or business in the U.S. during the three preceding tax years, and has timely filed an income tax return for each of those three years. For example a NOL claimed in 2024 the three preceding tax years are 2020 through 2024. Copies of these income tax returns should be included in the application. However, if the applicant does not include tax returns with the application, you can process the application when the necessary information is verified using IDRS. The tax examiner MUST research IDRS to verify the required tax returns were filed. You must verify the NOL with either the return or IDRS to consider it. The American Recovery and Reinvestment Act of 2009 provides an extended carryback period for "eligible small businesses" sustaining a NOL in tax year 2008.

   Exception: If a business is less than three years old, the NOL can be taken into account, but the business must have timely filed an income tax return for those years it was in existence.

2. The NOL is reflected on previously filed returns.

   Note: Do not consider an anticipated loss to current year operations.

3. The claimed NOL is not currently the subject of an examination by or dispute with the Service (AMDIS status greater than 08).

4. The transferor (seller) agrees that, if the amount of gain claimed and offset by the NOL on the application EXCEEDS the amount of the gain actually recognized and offset by a NOL when the tax return is filed for the current year, interest is due and payable on the amount subject to withholding (the difference between the amount actually withheld and the total actually due).

5. The claimed NOL was not previously used to reduce withholding upon other dispositions of USRPI's or to reduce the amount of any other obligation or liability under the U.S. Internal Revenue laws.

6. The transferor (seller) states in the application: At least 80 percent of its gross income subject to U.S. taxation in the year of disposition is derived from USRPI's.

(5) Transferor's (seller's) unsatisfied withholding liability: Analyze the application to determine if there is an unsatisfied liability.

1. The applicant must provide a calculation of the transferor's (seller's) unsatisfied withholding liability or evidence it does not exist. That liability is the amount of any tax the transferor (seller) was required to withhold, but did not withhold, under FIRPTA, the subject USRPI or a prior interest.

2. The transferor's (seller's) unsatisfied withholding liability is included in the calculation of maximum tax liability, so the prior withholding liability may be satisfied by the transferee's (buyer's) withholding upon the current transfer. Evidence may include one or more of the following:

Examples of Evidence — See Rev. Proc. 2000-35
The transferor (seller) acquired the subject or prior real property interest before January 1, 1985
A copy of Form 8288 with proof of payment of the amount shown
A copy of a withholding certificate for the subject or prior real property, and a copy of Form 8288 with proof of payment
A copy of the non-foreign certificate furnished by the person from whom the subject or prior USRPI was acquired, executed at the time of acquisition
Evidence the transferor (seller) purchased the subject or prior real property interest for $300,000 or less AND a statement signed by the transferor (seller) indicating they purchased the property for use as a residence
Evidence the person, from whom the transferor (seller) acquired the subject or prior USRPI, FULLY paid any tax imposed
A copy of notice of nonrecognition treatment provided to the transferor (seller) by the person from whom the transferor (seller) acquired the subject or prior USRPI, or
A statement signed by the transferor (seller) under penalties of perjury, giving the facts and circumstances to support the transferor's (seller's) claim no withholding was required under FIRPTA with respect to the transferor's (seller's) acquisition of the subject or prior real property.

(6) Refer to the following chart about Form 8288-B line 8 processing:

(7) Installment sales: When the application identifies Installment Sales (CAT 3), take the following steps.

1. Follow the instructions in (3) above.

2. Ensure the installment Payment amount is in accordance with the installments approved on Form 8288-B.

(8) The 1997 Taxpayer Relief Act replaced Section 121 one- time exclusion and Section 1034 roll-over provision with amended Section 121, that generally allows a taxpayer (including Nonresident Aliens) to exclude up to $250,000 ($500,000 for certain joint returns) of gain on the sale of property if the property was owned and used as the taxpayer's principal residence for at least two of the last five years before the sale or exchange. The exclusion can be used on a continuing basis, but not more frequently than once every two years. This became effective on sales after May 6, 1997.

(1) Many transactions affect the FIRPTA tax calculation in addition to NOLs. This subsection describes some of the transactions taken into account.

(1) After the forms are reviewed for completeness enter the information into the database to update the record and generate the correct letters to the transferor (seller) and transferee (buyer). When entering an application into the database take particular care to enter the earliest IRS received date into the database. For further information see IRM 21.5.1.4.2.4, Received Date-Determination. For applications missing the postmarked envelope refer to IRM 3.11.6.4.5.1, Determining Timeliness

(2) Refer to your FIRPTA and Foreign Partnership Withholding Job Aid, Catalog Number 50568X, for instructions on the Withholding Certificate database.

(3) Take note once the Form 8288-B information is entered into the database and the record entry is saved, a control file number is automatically assigned by the computer. The control file number consists of the current year being processed and a five- digit number (i.e., yyyynnnn, 202400001 for the first file number entered).

(1) When a Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests is rejected, or issued for a reduced withholding amount, the transferee (buyer) is instructed to file Form 8288 within 20 days of the date of the rejection, but only if the transfer took place. Otherwise, the transferee (buyer) or transferor (seller) should inform the IRS the transfer did not take place. This will ensure the filing of required returns, and if not, then a follow up system is in place.

(2) Every Monday, the INTLWebApps Database matches the Form 8288-B Disposal Code 04 (Rejected) or 05 (Unprocessable-Late) cases against the 8288 Database when the 8288-B follow-up list is being generated.

(3) A Disposal Code 04 case enters the 8288-B Follow-up program 90 days after the initial contact rejection letter was issued. A Disposal Code 05 case enters the Form 8288-B Follow-up program 70 days after the initial contact unprocessable letter was issued.

(4) Every Monday (weekly basis), the Unit Manager, or Lead Tax Examiner accesses the FIRPTA Database main menu screen. Once at the FIRPTA menu, select Menu Option "Form 8288 Audit". Now select "Audit Search".

(5) This will bring up the report menu window where you will enter the "Monday date", in the "Follow Up Date field ". Select the Disposal Code(s) then select the "Search By Disposal Code" button. This updates the database status indicator to "S" for aged cases and generates the report.

(6) Review the 8288-B report list and additional research performed against the 8288 Database before a second contact letter is issued.

(7) There are a number of statuses used in processing Form 8288-B follow-up cases. The statuses become effective only after the initial (70 days or 90 days) pending days have expired. The following table identifies the status code and their meaning:

(8) Use the following table to update the status.

(9) In order to print the second contact Letter 3534, select "Print" from the Form 8288 Audit menu. Select "Generate Letter 3543" to print the letter.

(10) To check the status responses on all cases where a 3543 letter was sent select "Form 8288 Audit" from the FIRPTA menu and search by Follow-up Status. The status is a "W".

(1) A "W" status automatically generates when the second contact letter is printed from the INTLWebApps database. . This action alerts the computer to schedule a systemic follow-up 90 days from the date of the letter.

(2) If a Form 8288 return is filed within 90 days from the initial letter, the computer will not select that "rejected / non-processable" case for the follow-up program.

(3) If the follow-up program does not locate a Form 8288 filing within 90 days from the initial letter, it will select the "rejected / non-processable" case for the follow-up process.

(4) If the transferee (buyer) corresponds to inform the IRS the sale did not go through, take the following action:

1. Select Menu Option "Form 8288 Audit".

2. Depress the "Select Audit Search" button.

3. Enter the follow up dates in the applicable field(s) and depress the "Search by Follow-up status" button.

4. To change the status, select the case control number for editing. Enter the correct status character found on the withholding certificate page as referenced in paragraph 7 of IRM 21.8.5.4.8. Enter an R in the status field to indicate no further follow-up is required.

5. In the remarks field, enter the reason for the status change and your employee profile number.

6. Depress the SAVE button.

7. Repeat the above steps to query another case.

(5) If the status does not change within 90 days from the date of the second contact letter, the computer will perform a secondary search of the 8288 database to locate a return. If an 8288 return is not located by the computer and the amount realized is ≡ ≡ ≡ ≡ ≡ ≡ ≡ or greater, the computer will assign a "T" status and case will appear on the weekly follow-up report for transshipping. Otherwise, the computer will assign an "N" status.

• The INTLWebApps system will select cases with a "W" status, as well as new disposal code 04 and 05 cases to match them against the 8288 database.

• If an 8288 is found, the status will update to "F or R" and no further action is required.

• If no data is found in the 8288 database, the case will appear on the follow-up report.

• After a second contact letter (3543) is issued, suspend the case in the system for another 90 days. If after 90 days, no 8288 is found or the taxpayer does not respond, the status updates to a "T" indicating a potential transfer to Small Business Self Employed (SBSE) International Examination.

(1) When a rejected (disposal code 04) or unprocessable (disposal code 05) 8288-B reaches a "T" status and the case cannot be resolved in the FIRPTA Unit, refer the case to SBSE International Examination. Refer only those cases where the amount realized on the sale of the USRPI is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or greater. If the amount realized is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, enter status code "R".

(2) On a weekly basis, the designated employee selects "Option 4" from the 8288-B Follow-up on Rejected or Non-Processable Applications menu.

(3) A listing generates showing cases still open and in "T" status.

(4) Before transshipping the case to SBSE International Examination, verify the 8288 Batch work is current in processing to ensure if the taxpayer has filed within the last 90 days the return will have been processed. If not current, search the existing batch work within the unit. If more research is warranted, complete it before transferring the case.

(5) If transfer to SBSE International Exam in Ogden is required, prepare a Form 3210, Document Transmittal and address it to:
Internal Revenue Service
Attn: Classification M/S 4160
1973 Rulon White Boulevard
Ogden, UT 84404.

(6) All completed cases must show a status of R, N, or T.

(1) The transferor (a foreign person or entity seller) may request an early refund of the FIRPTA tax paid on Form 8288 prior to the date on which the transferor's tax return is due (without extensions) if they received an approved withholding certificate reducing or eliminating the FIRPTA tax withholding that was paid.

(2) The transferor's (seller's) request for an early refund must be made in the form of a letter or a Form 843, Claim For Refund and Request for Abatement, and must:

• Be signed by the transferor (seller)

• Contain the transferor's (seller's Social Security Number (SSN), Individual Tax Identification Number (ITIN), or Employer Identification Number (EIN)

• Have a copy of the withholding certificate attached (secure one from database if not attached)

• Have a stamped copy of Form 8288-A, or Form 8288-C Copy B attached.

Note: At times, a request for an early refund is attached to the Form 8288-B application. If a reduced or zero withholding certificate is approved, process the request for an early refund.

(3) An Early FIRPTA refund is issued within the same year of withholding. Therefore, no interest is paid on the refund.

(4) Use IDRS Letter 12C, Individual Return Incomplete for Processing: Forms 1040, 1040A or 1040EZ, Letter 3104C, FIRPTA and Foreign Partnership Withholding Tax Return Processing, Withholding Certificate Checklist Letter 3319, or the telephone to request from the transferor (seller) a signature, Form 8288-A Copy B, or a Taxpayer Identification Number. Suspend case for 30 days (45 days if foreign address) before disallowing the claim.

(5) Upon receipt of all the required information, the FIRPTA early refund claim is complete.

(6) Prior to processing the early refund request, research the foreign person's TIN to look and see if the transferor (seller) has an existing balance due on Master File or Non-Master File, or a "V-" or "-V" freeze code.

1. If a "V-" freeze is found, then a balance due account is present.
   NMF Form 8288: Transfer the funds via Form 2424, Account Adjustment Voucher (use the Claim Received Date as the credit date on Form 2424, and the date of payment as the debit date on Form 2424) to the Balance Due account. The remainder of the money (if any) is refunded to the foreign person.
   BMF Form 8288: Transfer the funds via IDRS Command Code ADD24 to the balance due account. The remainder of the money (if any) is refunded to the foreign person.

2. If a "-V" freeze is present, then the taxpayer is in Bankruptcy Status and you must contact the IRS "Insolvency Unit" located in the taxpayer's geographical area. Follow the instructions given to you by the Insolvency Unit.

(1) The Foreign Investment in Real Property Tax Act (FIRPTA) Coordinator is the Examination Revenue Agent (RA) located at Ogden Service Center (OSC). The RA serves as a resource for the FIRPTA tax examiner processing the election under IRC 897(i) and for handling Withholding Certificates under Category 4, 5 and 6.

(2) The FIRPTA Coordinator assists the Ogden Technical Team by providing technical expertise about an 897(i) election.

(1) Applications are made in the form of a letter or document under Treasury Regulation 1.897-3(c)(1). The letter or document must:

• State "An election under section 897(i) is being made"

• Contain the signature of a responsible corporate officer, verified under penalty of perjury that the statement and all other documents submitted are true to his/her knowledge and belief (1.897-3(c)(1))

• Demonstrate the applicant is a USRPHC (Treasury Regulation 1.897-–8(b))

• Contain general information with regard to the foreign corporation (1.897-3(c)(1)(i)): Name, Address, Identifying number, and Place and Date of Incorporation

• Identify the Tax Treaty and Article under which the foreign corporation is seeking nondiscriminatory treatment (1.897-3(c)(1)(ii))

• Describe the USRPI (1.897-3(c)(1)(iii)), dates acquired, adjusted basis, fair market value on date of election, or book value if not a U.S. real property holding corporation under 1.897-2(b)(2).

(2) In addition, the following statements must be attached to the election request:

• Waiver of Treaty Benefits (1.897-3(c)(2)): A statement the electing foreign corporation is waiving treaty benefits with respect to any gain or loss from the disposition of a USRPI during the period in which the election is in effect.

• Consent to Taxation (1.897-3(c)(3)): A binding agreement to treat as though it was a domestic corporation, any gain or loss recognized upon the disposition of any USRPI during the period in which the election is in effect AND the disposition of any property acquired in exchange for a USRPI in a nonrecognition transaction.

• Interest-holders' consent to election (1.897-3(c)(4)): From each person holding an interest in the corporation, a signed consent to the making of the election and a waiver of U.S. treaty benefits (1.897-3(c)(4)(i)), and a list that describes and identifies each interest holder's interest. State type, amount and fair market value as of election date.

• Corporation's retention of interest-holders' consent (1.897-3(c)(4)(i)) : A corporation need not comply with 1.897(c)(4)(i) if it complies with the following requirements: 1. The corporation must place a legend on each outstanding certificate for shares of its stock that reads substantially as follows: "[Name of corporation} has made an election under section 897(i) of the United States Internal Revenue Code to be treated as a U.S. corporation for certain tax purposes, and any purchaser of this interest may therefore be required to withhold tax at the time of purchase." The corporation must certify the foregoing requirement is met. 2. The corporation must include with its election a statement the corporation has received both a signed consent to the making of the election and a waiver of U.S. treaty benefits with respect to gain or loss from the disposition of an interest in the corporation from each person who holds an interest in the corporation on the date the election is made. 3. The corporation must include with its election a list describing the interest in the corporation held by each interest-holder. The list need not identify the interest-holders by name, but must set forth the type, amount, and fair market value of the interests held by each. 4. The corporation must include with its election an agreement the corporation will keep all signed consents and waivers for a period of three years from the date of the election and supply the documents within 30 days of a request.

• Statement regarding prior dispositions (1.897-3(c)(5)) stating: No interest in the corporation was disposed of during the shortest of; the period from 6/19/1980 through the election date; or, the period from the date on which the corporation first holds a USRPI through the election date OR the five-year period ending on the date of election.

  Exception: If a corporation is unable to state no such dispositions are made, it may make the 897(i) election ONLY if it says it has complied with the requirements of 1.897-(d)(2) (Election after disposition of stock).

(1) An Election after Disposition of Stock IRC 1.897-3(d)(2) may be made after a disposition, if the requirements of either IRC 1.897-3(d)(2)(i) or IRC 1.897-3(d)(2)(ii) are met.

• IRC 1.897-3(d)(2)(i) - Payment of any tax which would have been imposed upon all persons who had disposed of interests. Such payment must be made by the later of the date the election is made, or the date on which payment of such taxes otherwise due. The taxpayer must also include any interest that would have accrued, had tax actually been due with respect to the disposition. When a payment is made by a present holder of an interest, the basis of the person's interest shall be increased to the extent of the amount paid.

• IRC 1.897-3(d)(2)(ii) - Each person acquired an interest in the electing corporation took a basis in the interest equal to the basis of the interest in the hands from which the interest was acquired, increased by the sum of any gain recognized by the transferor (seller) of the interest and any tax paid under chapter 1 by the person that acquired the interest, if such interest was acquired after 6/18/80.

• Adequate proof of basis: The corporation must establish the basis and amount gain realized by all persons.

(2) Anti-Abuse rule IRC 1.897-3(e) - A corporation otherwise eligible for an IRC 897(i) election, may do so only by complying with the requirements of Treasury Regulation 1.897-3(e)(2) during the period described in Treasury Regulation 1.897-5(c)(5):

• Prior to receipt of USRPI by electing corporation, the stock in such corporation (or in any corporation controlled by such corporation) was acquired in a transaction in which the transferee (buyer) of such stock, obtained an increase in basis in the stock over the adjusted basis of the stock of the transferor (seller); AND

• The full amount of gain realized by the transferor (seller) was not subject to U.S. tax; AND

• The electing corporation received the USRPI in a transaction to which IRC 897(d)(1)(B) or IRC 897(e)(1) applies providing for nonrecognition of gain.

• Recognition of gain. A corporation which is otherwise eligible to make an election under Section 897(i), may do so only by complying with the requirements set out in the Reg. 1.897-3(e)(1) (Anti-Abuse Rule). Such amount must be paid only if the stock of the electing corporation would have constituted a USRPI had it made the election before the acquisition. Such amount must be paid by the later of the date of the election OR the date on which such tax would otherwise be due. Also, must include any interest that would have accrued had tax actually been due with respect to the disposition.

• Definition of control. For purposes of the Anti-Abuse rule, a corporation controls a second corporation if it holds 80 percent or more of the total combined voting power of all classes of stock entitled to vote; AND holds 80 percent or more of the total number of shares of all other classes of stock of the second corporation.

(3) If the election was signed by someone other than an correct corporate officer, a valid Power of Attorney (POA) must be attached.

(4) The approved taxes and interests paid are NON-REFUNDABLE.

(1) An application for an IRC 897(i) election is mailed to:

Ogden IRS Campus
Accounts Management
PO Box 409101
Ogden, UT 84409

(2) These applications get hand carried to the FIRPTA Processing Unit within the Campus.

(3) The case is assigned to a tax examiner who performs the duties of perfecting the application.

(4) The tax examiner determines whether to request more information using the Checklist Letter 3495 , issue acceptance acknowledgment Letter 3496 , or reject the application using IDRS Letter 3064C, to the foreign corporation.

(1) The IRS "must" either issue the acceptance acknowledgement Letter 3496 within 60 days of receipt of the IRC 897(i) Election application, correspond for more information using Checklist Letter 3495, or issue a rejection of the election using IDRS Letter 3064C.

• Completely review the application for all required information. If information is missing, correspond with the applicant, or duly authorized agent, by using checklist Letter 3495.

• The checklist is also provided to help you in reviewing the election application for completeness under IRC 897(i).

• After receiving the requested information, incorporate it with the original application.

• After final determination is made, issue acceptance acknowledgement Letter 3496 to inform the applicant, or their duly authorized agent of the approval.

(2) Retain all IRC 897(i) Elections in record storage with a destruction date of 10 years from the date of record storage.

(1) Assemble the election application package to include the following in the order referenced:

• FIRPTA Input Document

• Information Checklist

• Application

• Any other documents enclosed, such as a Power of Attorney (POA), etc.

  Note: Forward Form 2848, Power of Attorney and Declaration of Representative to the Centralized Authorization File (CAF) Unit, for input to IDRS and/or assignment of a CAF number.

(1) Withholding is not required if a U.S. real property interest is disposed of in a nonrecognition transaction. A nonrecognition transaction generally includes any transaction afforded nonrecognition treatment by the operation of a nonrecognition provision of the IRC, or if under the provisions of a tax treaty, the transferor (seller) is not required to recognize a gain.

(2) Withholding is also not required if a foreign person disposes of an interest in a domestic corporation and that corporation establishes it is not a USRPHC under Treasury Regulation 1.897-2.

(3) Withholding is not required if the property is not a U.S. real property interest. To determine whether an interest in real property or a domestic corporation constitutes a U.S. real property interest, see Treasury Regulation 1.897-1 and 1.897-2.

(4) Withholding is not required if one or more individual transferees (buyers) acquire the U.S. real property interest for use as a residence and the amount realized on the transfer is $300,000 or less. See Treasury Regulation 1.1445-2(d)(1).

(5) A transferee is not required to withhold if, prior to or at the time of the transfer, the transferor provides a written notice to the transferee that:

• States the transferor is not a foreign person;

• Sets forth the transferor’s name, identifying number, and home address; and

• Contains a signature under penalties of perjury. See Treasury Regulation 1.1445-2(b).

(1) The request for relief is a completed statement or notice containing a detailed explanation why the failure to timely file was due to reasonable cause. The documents will state Filed Pursuant to Rev. Proc. 2008-27. The documents are filed with the IRS at
Ogden Service Center
P.O. Box 409101
Ogden, UT 84409

(2) Required elements:

• A notice or statement required under sections 1.897-2(g)(1)(ii)(A), 1.897-2(h), 1.1445-2(c)(3)(i), 1.1445-5(d)(2), 1.1445-5(b)(2), or 1.1445-5(b)(4) was not filed with the relevant person or the IRS.

• With respect to a completed statement or notice required to be filed with the IRS under sections 1.897-2(h), 1.1445-2(d)(2), or 1.1445-5(b)(2) as applicable, the taxpayer must attach an explanation describing why the taxpayer's failure to timely file the statement or notice was due to reasonable cause. Additionally, within the explanation, the taxpayer must provide they obtained from an appropriate person the statements or notices required under sections 1.897-2(g)(1)(ii)(A), 1.1445-2(c)(3)(i), 1.1445-2(d)(2)(i)(A), or 1.1445-5(b)(4)(iii)(A), as applicable.