Christopher A. CombsQuestion: We sold a 20-acre parcel of land in Buckeye for $3 million. At the close of escrow, the escrow company transferred 15% of the sale proceeds — $450,000 — to the IRS. The escrow company said that this transfer is because we may have to pay capital gains taxes on the sale, and we’re not U.S. citizens. Is that correct?Answer: Yes. Under the Foreign Investment in Real Property Tax Act, an escrow company is required to withhold and transfer to the IRS a certain percentage of the sale proceeds of most real property sold by people who are not U.S. citizens. If a seller of real property who is not a U.S. citizen files a tax return with the IRS that shows no capital gains tax is owed, the IRS will send them a refund.Note: Under the Foreign Investment in Real Property Tax Act, the withholding is 15% for any real property that sells for more than $1 million. For real property that sells for more than $300,000 but less than $1 million, the withholding is 10%. There is no withholding for real property that sells for $300,000 or less.Contact real estate attorney Christopher A. Combs at azrep@combslawgroup.com. …
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