Disposition of stock of a domestic corporation that is a real property holding corporation is subject to tax under FIRPTA.

Question

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FIRPTA (Foreign Investment in Real Property Tax Act) requires that a certain percentage of the gross sales price be withheld and paid to the IRS to ensure that the foreign person or entity pays any U.S. taxes owed on the disposition of the real property in question. This applies to both individuals and corporations who are not U.S. taxpayers. Domestic corporations can also be subject to FIRPTA if they are considered real property holding corporations (which means they primarily hold real property assets), and their stock is subsequently sold or transferred to a foreign person or entity. Therefore, the disposition of stock of a domestic corporation that is a real property holding corporation would be subject to tax under FIRPTA.

Disposition of Stock of a Domestic Corporation That Is a Real