Instructions For Form 8288 (Page 4 of 5) in pdf

3. Typing, copying, and other clerical

interest, the amount of gain realized must

partnerships, trusts, and estates, until the

tasks.

be paid into a separate “U.S. real property

effective date of a Treasury Decision

4. Obtaining title insurance reports

interest account.” For these purposes, a

under section 897(e)(2)(B)(ii) and (g).

and reports concerning the condition of

domestic trust is one that does not make

Section 1445(e)(5) Transactions

the property.

the “large trust election” (explained

The transferee of a partnership interest

5. Transmitting documents between

below), is not a qualified investment

must withhold 10% of the amount realized

the parties.

entity, and is not publicly traded. The

on the disposition by a foreign partner of

6. Functioning exclusively in his or her

fiduciary must withhold 35% of the

an interest in a domestic or foreign

capacity as a representative of a

amount distributed to a foreign person

partnership in which at least 50% of the

condominium association or cooperative

from the account during the tax year of

value of the gross assets consists of U.S.

housing corporation. This exemption

the trust or estate in which the disposition

real property interests and at least 90% of

includes the board of directors, the

occurred. The withholding must be paid

the value of the gross assets consists of

committee, or other governing body.

over to the IRS within 20 days of the date

U.S. real property interests plus any cash

of distribution. Special rules apply to

Entities Subject to Section

or cash equivalents. However, no

grantor trusts. See Regulations section

withholding is required under section

1445(e)

1.1445-5 for more information and how to

1445(e)(5) for dispositions of interests in

compute the amount subject to

Withholding is required on certain

other partnerships, trusts, or estates until

withholding.

distributions and other transactions by

the effective date of a Treasury Decision

Large trust election. Trusts with

domestic or foreign corporations, qualified

under section 897(g). No withholding is

more than 100 beneficiaries may make an

investment entities, trusts, and estates. A

required if, no earlier than 30 days before

election to withhold upon distribution

domestic trust or estate must withhold

the transfer, the transferee receives a

rather than at the time of transfer. The

35% of the amount distributed to a foreign

statement signed by a general partner

amount to be withheld from each

beneficiary from a “U.S. real property

under penalties of perjury that at least

distribution is 35% of the amount

interest account” that it is required to

50% of the value of the gross assets of

attributable to the foreign beneficiary’s

establish under Regulations section

the partnership does not consist of U.S.

proportionate share of the current balance

1.1445-5(c)(1)(iii). A foreign corporation

real property interests or that at least 90%

of the trust’s section 1445(e)(1) account.

that has not made the election under

of the value of the gross assets does not

This election does not apply to any

section 897(i) must withhold 35% of the

consist of U.S. real property interests plus

qualified investment entity or to any

gain it recognizes on the distribution of a

cash or cash equivalents. The transferee

publicly traded trust. Special rules apply

U.S. real property interest to its

may rely on the statement unless the

to large trusts that make recurring sales

shareholders. Certain domestic

transferee knows it is false or the

of growing crops and timber.

corporations are required to withhold tax

transferee receives a false statement

on distributions to foreign shareholders.

A trust’s section 1445(e)(1) account is

notice pursuant to Regulations section

the total net gain realized by the trust on

No withholding is required on the

1.1445-4.

all section 1445(e)(1) transactions after

transfer of an interest in a domestic

Section 1445(e)(6) Transactions

the date of the election, minus the total of

corporation if any class of stock of the

all distributions made by the trust after the

A qualified investment entity must

corporation is regularly traded on an

date of the election from such total net

withhold 35% of a distribution to a

established securities market. Also, no

gain. See Regulations section

nonresident alien or a foreign corporation

withholding is required on the transfer of

1.1445-5(c)(3) for more information.

that is treated as gain realized from the

an interest in a publicly traded partnership

sale or exchange of a U.S. real property

or trust.

Section 1445(e)(2) Transactions

interest. No withholding under section

No withholding will be required with

A foreign corporation that distributes a

1445 is required on a distribution to a

respect to an interest holder if the entity

U.S. real property interest must generally

nonresident alien or foreign corporation if

or fiduciary receives a certification of

withhold 35% of the gain recognized by

the distribution is on stock regularly

nonforeign status from the interest holder.

the corporation. No withholding or

traded on a securities market in the

An entity or fiduciary may also use other

reduced withholding is required if the

United States and the alien or corporation

means to determine that an interest

corporation receives a withholding

did not own more than 5% of that stock at

holder is not a foreign person, but if it

certificate from the IRS.

any time during the 1-year period ending

does so and it is later determined that the

on the date of distribution.

Section 1445(e)(3) Transactions

interest holder is a foreign person, the

withholding may be collected from the

Generally, a domestic corporation that

entity or fiduciary.

distributes any property to a foreign

Specific Instructions

Section 1445(e)(1) Transactions

person that holds an interest in the

corporation must withhold 10% of the fair

Complete only Part I or Part II.

Partnerships. A domestic partnership

market value of the property distributed if:

that is not publicly traded must withhold

1. The foreign person’s interest in the

CAUTION

tax under section 1446 on effectively

corporation is a U.S. real property interest

Example 1. B, a corporation,

connected income allocated to its foreign

under section 897, and

purchases a U.S. real property interest

partners and must file Form 8804, Annual

2. The property is distributed in

from F, a foreign person. On settlement

Return for Partnership Withholding Tax

redemption of stock under section 302, in

day, the settlement agent pays off

(Section 1446), and Form 8805, Foreign

liquidation of the corporation under

existing loans, withholds 10% of the

Partner’s Information Statement of

sections 331 through 341, or with respect

Section 1446 Withholding Tax. A publicly

amount realized on the sale, and

to stock under section 301 that is not

traded partnership or nominee generally

disburses the remaining amount to F. B,

made out of the earnings and profits of

must withhold tax under section 1446 on

not the agent, must complete Part I of

the corporation.

distributions to its foreign partners and

Form 8288 and Form 8288-A.

must file Forms 1042 and 1042-S.

Example 2. C, a domestic

No withholding or reduced withholding

Because a domestic partnership that

corporation, distributes property to F, a

is required if the corporation receives a

disposes of a U.S. real property interest is

foreign shareholder whose interest in C is

withholding certificate from the IRS.

required to withhold under section 1446, it

a U.S. real property interest. The

Section 1445(e)(4) Transactions

is not required to withhold under section

distribution is in redemption of C’s stock

1445(e)(1).

No withholding is required under section

(section 1445(e)(3) transaction). C must

Trusts and estates. If a domestic trust

1445(e)(4), relating to certain taxable

withhold 10% of the fair market value of

or estate disposes of a U.S. real property

distributions by domestic or foreign

the property distributed to F. C must

-4-

Instructions for Form 8288 (Rev. 6-2011)

Instructions For Form 8288 Page 4

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