The Reporting Requirements of FIRPTA: What to Expect in the Final Regulations

In September 1982, the US Treasury Department issued proposed regulations under the provisions of the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), codified in Sections 897 and 6039C of the Internal Revenue Code. The proposed regulations under Section 6039C are long and complex, leaving many questions unanswered. Problems tax practitioners may encounter in trying to comply with the section's reporting requirements are discussed, along with suggested changes. These requirements apply in general to 3 classes of persons: 1. domestic US real property holding corporations with one or more foreign shareholders, 2. foreign corporations and foreign or domestic entities having substantial investors in US real property, and 3. foreign persons not engaged in a US trade or business. The provisions in the proposed regulations regarding security agreements, which are of great interest to tax practitioners, have raised questions concerning: 1. taxes covered, 2. type and amount of security, and 3. the effect of, renewal of, and application for a security agreement.