A Discussion as to How Foreign Investors Can Use Shared Appreciation Mortgages to Avoid FIRPTA Withholding Associated with the Sale of U.S. Real Estate
By Anthony Diosdi When U.S. real estate became a popular investment with foreign investors in the 1970s, the favorable tax treatment accorded foreign investors in U.S. real property became a domestic political issue. Congress responded in 1980 by enacting the Foreign Investment in Real Property Tax Act of 1980 (or “FIRPTA”), which attempted to equalize the tax treatment of real property gains realized by domestic and foreign investors. Prior to FIRPTA, foreign persons generally were not taxed on gains from the disposition of a U.S. real property interest. Under FIRPTA, gains or losses realized by foreign corporations or nonresident alien individuals from any sale, exchange, or other disposition of a U.S. real property interest are taxed in the same manner as income effectively connected with the conduct of a U.S.…