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FIRPTA Withholding Tax Increases

By:  Amanda Wilson

The Foreign Investment in Real Property Tax Act (FIRPTA) subjects foreign sellers to U.S. tax when they sell their interest in real property located in the U.S., including interests in companies that predominately hold real estate.  To accomplish this, the purchasers generally are required to withhold 10% of the gross sales price when the seller is foreign.  Legislation that was passed at the end of last year (the PATH Act) increases this withholding rate from 10% to 15% effective as of February 16, 2016.  If you are purchasing a U.S. real estate interest from a foreign seller, make sure you are aware of this change and adequately withhold.  If you fail to do so, you may find yourself liable for the extra withholding. read more

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Worthless Debt Deduction – A Cautionary Tale

By:  Amanda Wilson

For partnership, individuals and other types of taxpayers that are not in the business of making loans, the main avenue for tax relief when a loan goes bad is Section 166 – the bad debt deduction.  In order to claim this deduction, the taxpayer must show that the debt has become wholly worthless during the tax year in which the deduction is claimed.  This can often be a very difficult burden for taxpayers, especially if there is no external event that they can identify as a trigger for worthlessness.  Even if there is such an event (such as the borrower declaring bankruptcy), worthlessness can be difficult to establish. read more

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Government Shutdown Does Not Affect October 15th Tax Filing Deadlines

By:  Amanda Wilson

As a result of the government shutdown, IRS operations are extremely limited and most IRS personnel have been furloughed.  During this shutdown, the IRS will not be processing tax refunds.  However, taxpayers should not view this shutdown as impacting their tax filing obligations.  Specifically, taxpayers that filed an extension for their personal income tax returns should still file by the October 15th deadline.  For more information, please see IRS Operations During Lapse in Appropriations. read more