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  • Daniel Gray CPA Toronto

Buyer's 300,000 Withholding Exemption Affidavit


One common exception from FIRPTA Withholding is when buyer acquires the property for use as a residence and the amount realized (sales price) is not more than USD $300,000. Buyer or a member of buyer’s family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer. When counting the number of days the property is used, do not count the days the property will be vacant. For this exception, the buyer must be an individual. Buyer should sign to seller a residential use affidavit, such as the one attached here.

Buyer Affidavit

But, stay alert and aware of estimated tax payment requirement because you can be penalized if you do not comply and pay any tax due on time. Reg §1.1445-5 states: ). If the amount withheld under section 1445(e) constitutes less than the full amount of the foreign person's U.S. tax liability for that taxable year, then a payment of estimated tax may be required to be made pursuant to section 6654 (section discussing failure by individual to pay estimated income tax) prior to the filing of the income tax return for the year.

In some instances, the foreign person may apply for a withholding certificate to reduce or eliminate withholding on the disposition of real property.

The amount that must be withheld from the disposition of a U.S. real property interest can be adjusted pursuant to a withholding certificate issued by the IRS. The IRS will generally act on these requests within 90 days after receipt of a complete application. A seller that applies for a withholding certificate must notify the buyer in writing that the certificate has been applied for on the day of or the day prior to the transfer.

If an application for a withholding certificate is submitted to the IRS before or on the date of a transfer and the application is still pending with the IRS on the date of transfer, the correct withholding tax must be withheld, but does not have to be reported and paid immediately. The amount withheld (or lesser amount as determined by the IRS) must be reported and paid within 20 days following the day on which a copy of the withholding certificate or notice of denial is mailed by the IRS.


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