ROBERT LORENCE AND JOHN CARDONE, INTERNAL REVENUE SERVICE MAY 14, 2004 2004 INTERNATIONAL FORUM

FOREIGN PERSON ANY BUYER

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WITHHOLD 10-PERCENT OF SALES PRICE.

FILE FORMS 8288 & 8288A WITH WITHHOLDING TAX. FORM 8288 IS THE WITHHOLDING TAX RETURN.

FORM 8288A IS SELLER’S RECEIPT FOR WITHHOLDING TAX. ANY BUYER

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FOREIGN PERSON MUST FILE A TAX RETURN REPORTING GAIN OR LOSS ON THE SALE (FORM 1040NR OR 1120F).

CREDIT WITHHOLDING TAX AGAINST INCOME TAX ON RETURN. ATTACH COPY OF FORM 8288A AS PROOF OF WITHHOLDING TAX PAID.

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EFFECTIVE NOVEMBER 4, 2003, FORMS 8288 & 8288A SHOULD HAVE TIN OF FOREIGN SELLER AND BUYER.

WHY? SO SELLER’S TAX RETURN CAN EASILY BE MATCHED WITH WITHHOLDING TAX RETURN.

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WHAT IF SELLER OR BUYER DOES NOT HAVE A TIN? PROCEED WITH CLOSING, WITHHOLD TAX, AND FILE FORMS 8288 & 8288A. THERE ARE REMEDIES FOR TAXPAYERS TO GET TINS AT OR SUBSEQUENT TO CLOSING.

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A FOREIGN CORPORATION CAN OBTAIN AN EIN BY TELE-TIN OR FAX-TIN. PUT EIN ON FORMS 8288 AND 8288A. IF A NONRESIDENT ALIEN INDIVIDUAL HAS A SOCIAL SECURITY NUMBER, THAT IS HIS OR HER TIN. PUT THAT ON FORMS 8288 & 8288A.

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IF A NONRESIDENT ALIEN INDIVIDUAL DOES NOT HAVE A SOCIAL SECURITY NUMBER, MUST APPLY FOR ITIN ON FORM W-7 ALONG WITH SUPPORTING DOCUMENTATION. THERE ARE THREE CHANCES TO GET AN ITIN IN A FIRPTA TRANSACTION: “THREE BITES OF THE APPLE”.

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SELLER OR BUYER (OR BOTH) APPLY FOR ITIN ON FORM W-7 WHEN FILING FORMS 8288 & 8288A. IRS WILL PROCESS FORM W-7, ISSUE THE ITIN, AND DOCUMENT ITIN ON FORMS 8288 & 8288A.

IRS WILL DATE STAMP FORM 8288A AND SEND IT TO SELLER. FORM 8288A NOT VALID WITHOUT TIN.

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WHAT IF FORM W-7 IS NOT SUBMITTED WITH FORMS 8288 & 8288A, OR FORM W-7 THAT IS SUBMITTED WITH FORMS 8288 & 8288A IS REJECTED?

IRS WILL SEND A LETTER (3794 SC/CG) TELLING TAXPAYER TO COMPLETE AND FILE FORM W-7.

COPY OF THE LETTER MUST ACCOMPANY FORM W-7.

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WHAT IF PREVIOUS BITES NOT EFFECTIVE, AND SELLER HAS NO TIN WHEN IT FILES ITS RETURN? IRS WILL NOT SEND FORM 8288A TO SELLER WITHOUT A VALID TIN. SELLER MUST FILE FORM W-7 WITH ITS TAX RETURN, ALONG WITH CLOSING DOCUMENTS EVIDENCING WITHHOLDING TAX.

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ASSUME WITHHOLDING TAX IS GREATER THAN SELLER’S TAX LIABILITY ON THE SALE. SELLER FILES APPLICATION FOR A WITHHOLDING CERTIFICATE (FORM 8288B) FOR REDUCED WITHHOLDING. BUYER WITHHOLDS 10-PERCENT BUT DOES NOT REPORT OR PAY TAX UNTIL IRS APPROVES OR DENIES APPLICATION.

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EFFECTIVE NOVEMBER 4, 2004, SELLER MUST HAVE A TIN FOR INCLUSION ON FORM 8288B. IF SELLER DOES NOT HAVE TIN, FILE FORM W-7 WITH FORM 8288B. IF NO FORM W-7 FILED WITH FORM 8288B, OR FORM W-7 REJECTED, FORM 8288B IS INCOMPLETE AND DENIED.

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ROBERT LORENCE, 202-622-3860 JOHN CARDONE, 202-622-6869 IRS GENERAL ASSISTANCE, 1-800-829-1040 INTERNAL REVENUE SERVICE 1111 CONSTITUTION AVENUE, N.W.

WASHINGTON, D.C. 20224