Happy 2024!
YOU HAVE QUESTIONS, WE HAVE ANSWERS!
VIVA ESCROW Q & A SEGMENT
(Real questions sent to us – verbatim!)
QUESTION:
A question from an Escrow Officer – I had a transaction in which the Trustee was deceased and the Successor Trustee, unknown to me, was a German citizen. The property sold was the original Trustee’s primary residence and the Trust had a Tax ID # which was used on the 1099.
The buyers are now receiving letters from IRS to complete 8288 and 8288 A forms and they are asking for me to complete them. Their Attorneys seem to think it was my job to do it.
Is that something I need to do ?
ANSWER:
The Successor Trustee being a foreigner should not trigger the foreign person’s withholding under the FIRPTA law, unless the original Trustees WERE foreigners. Then a withholding would be required.
Question: Did you obtain a signed FIRPTA exemption form in your transaction stating that the Trust WAS NOT a foreign entity and had a U.S. Tax ID number on it? If you did, then you are not required to withhold for the IRS.
The 8288 and 8288A forms are IRS FIRPTA forms that are signed by the Buyer and submitted to IRS with the withholding when one is necessary. Usually that is generated from the escrow company and sent with the withholding at closing. So if you did not generate that, what caused the IRS to send the forms to the Buyer after the fact?
I would suggest that you send a copy of the signed FIRPTA exemption form to the attorneys and let them know that since you had the exemption in your file, there was no withholding requirement. If there was a request for the 8288 and 8288A forms that means that somehow a withholding was done outside of your transaction, and not done correctly. That is very odd that it came back to you.
EDUCATIONAL MOMENT:
When you are handling a transaction as a Successor Trustee for a Trust in which the original Trustees/Trustors have passed or are unable to complete the transaction, please remember that everything you answer and provide in that transaction pertains to the original Trustees, not you. For instance, is the property considered the principal residence? The answer would be whether it was the principal residence of the original Trustees, not you.
Another reminder: when the original Trustees have all passed, the Successor Trustees need to apply for a brand new Tax Identification number from the IRS. Don’t use the dead Trustee’s social security number. However, if any one of the original Trustees is still living, then normally their social security number is used. It’s very important to check with your CPA for guidance. After all, they will be filing the income tax returns for the Trust at the end of the year.
Not all attorneys know the intricacies of escrow practices and particularly the FIRPTA withholding. They may not always be correct in their understanding. When in doubt, get input from others who are better versed or understand more before you respond. Don’t be threatened by an attorney’s demand!
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~ Awesome Video of the Month ~
GoPro’s Best of 2023 video compilation
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~ Questions for the Month ~
If a bottle of poison reaches its expiration date, is it more poisonous or is it no longer poisonous?
Which letter is silent in the word “Scent,” the S or the C?
Do twins ever realize that one of them is unplanned?
(With thanks to the Rob Chrisman Blog)
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My YouTube Offering for the Month
Following last month’s YouTube offering of California’s Withholding Part 1, here is:
California Withholding – Part 2- Questions and Answers
Remember, whether you are a foreigner or a resident, California withholding laws apply to all Sellers!
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You Have Questions? We Have Answers!
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”
Advance Disclosure:
The opinions expressed in this blog are solely the author’s.
Your comments and viewpoints are always welcome.
Info @ VivaEscrow.com