What does FIRPTA require from buyers when purchasing real estate from foreign sellers?

FIRPTA, or the Foreign Investment in Real Property Tax Act, mandates that buyers of real estate from foreign sellers must withhold a specified percentage of the purchase price for federal income tax purposes. This requirement exists to ensure that the U.S. government can collect income tax on the gains made by foreign sellers from the sale of real property in the United States.

The withholding amount is usually set at 15% of the gross sales price. This provision is crucial because foreign sellers may not always be subject to U.S. tax laws in the same way domestic sellers are, and FIRPTA ensures tax compliance in these transactions.

While other options may relate to various aspects of real estate transactions, they do not directly pertain to the obligations established under FIRPTA concerning foreign sellers and the withholding requirement.