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Fidelity National Title Insurance Company. SETTLEMENT. Odds and Ends. Federal Reporting/Withholding Requirements. Cash payments over $10,000 Real Estate Reporting Sales of U.S. Real Estate by Foreigners Agricultural Foreign Investment Disclosure Act .

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settlement

SETTLEMENT

Odds and Ends

federal reporting withholding requirements
Federal Reporting/Withholding Requirements
  • Cash payments over $10,000
  • Real Estate Reporting
  • Sales of U.S. Real Estate by Foreigners
  • Agricultural Foreign Investment Disclosure Act
slide4
Always obtain the most current IRS forms at www.irs.gov. Submitting outdated forms can result in rejection of report or withholding.
reporting cash payments
Reporting Cash Payments
  • > $10,000 in cash
  • One transaction, or 2 or more related transactions
  • IRS Form 8300
filing requirement
Filing requirement
  • File IRS Form 8300
  • By the 15th day after the date the cash transaction occurs
  • Civil and CRIMINAL penalties for failure to file
real estate reporting 1099s
Real Estate Reporting—1099S
  • Sellers of real property are required to have their gross proceeds from the sale reported on IRS Form 1099S.
  • When a settlement agent is used, the IRS makes this person responsible for delivery of the information on Form 1099S.
1099s information
1099S Information

The information is collected by the settlement agent, and transferred to the appropriate media for reporting to the IRS:

● name, address and taxpayer ID of seller(s)

● general description of property (address)

● closing date of transaction

● Gross proceeds of the transaction

● any property involved other than cash

● name, address and ID of settlement agent

1099s covered transactions
1099S Covered Transactions
  • Improved or unimproved land, including airspace
  • Inherently permanent structures, including any residential, commercial or industrial building
  • Sales and exchanges of any interest
  • Includes houses and condos
  • Includes stock in a cooperative housing corporation
  • Includes fee simple, life estate, reversion, remainder, and leaseholds with remaining term of at least 30 years
1099s excluded transactions
1099S Excluded transactions
  • Foreclosures, deeds in lieu or abandonments
  • Gifts, bequests
  • De minimus transfers (<$600)
  • Refinances
  • Qualifying sale or exchange of principal residence
  • Transaction where transferor is corporation
  • Exempt volume transferors (>25)
slide12
F.I.R.P.T.A. – Foreign Investment in Real Property Tax Act
  • Withholding obligation on the buyer or other transferee (withholding agent) when a U.S. real property interest is acquired from a foreign person
  • Withholding agent must withhold 10% of gross amount paid
slide13
You’re not a withholding agent if you only perform one or more of the following acts:
  • Receipt or disbursement of consideration
  • Recording of any document
  • Typing, copying or clerical tasks
  • Obtaining title insurance reports or property condition reports
  • Transmitting documents between parties
definition of foreign persons
Definition of Foreign Persons
  • A nonresident alien
  • Neither a U.S. citizen nor a U.S. resident
  • To qualify as U.S. resident, generally:
    • Has a green card, or
    • Is physically present in the U.S. for 183 days or more during the current calendar year
green card
“Green Card”

The U.S. Permanent Resident Card

irs form 8288
IRS Form 8288

When a non-U.S. person sells U.S. real estate, the IRS requires that 10% of the gross sales price be withheld at closing and remitted as an estimated tax payment on behalf of the foreign seller.

exceptions to withholding
Exceptions to withholding:
  • Seller is not a foreign person
  • Seller obtains a qualifying statement (a withholding certificate) from the IRS
  • Purchaser intends to use real property a a residence and purchase price is not more than $300,000
common misconceptions
Common misconceptions
  • “Foreign seller has a U.S. tax ID number or has applied for one” – the 10% withholding applies!
  • “Foreign person is selling at a loss” – the 10% withholding applies!
  • “Foreign seller files U.S. nonresident income tax returns each year” – the 10% withholding applies!
  • “1031 exchanges” – the 10% withholding applies
fsa 153
FSA-153

The Agricultural Foreign Investment Disclosure Act Report

slide21
All foreign owner of U.S. agricultural land must report their holdings to the Secretary of Agriculture.
  • Program is administered by the Farm Service Agency
  • Report must be made within 90 days of closing
  • FSA asks that settlement agents notify foreign investors of these requirements
state reporting requirements
State Reporting Requirements

Virginia Department of Taxation

Nonresident Property Owners

• Nonresident Real Property Owner Registration (Form R-5)

  • Exemption certificate (Form R-5E)
  • Shareholder/partner schedule (Form R-5P)
r 5 requirements
R-5 requirements:
  • Form must be filed by real estate reporting persons on all nonresident seller closings
  • If client doesn’t complete, you must complete on client’s behalf
  • Must be filed by the 15th of the month following the month in which closing occurred
  • Nonresident payees include individual nonresidents, corporations not organized in Virginia, estates and trusts administered outside of Virginia, partnerships, limited liability corporations and S-corporations with nonresident partners or shareholders
exemptions
Exemptions
  • Sales exempt from federal and state income tax are also exempt from registration—exemption certificate required
  • Principal residence up to $250,000 gain
  • Like-kind exchanges
  • Tax-free gifts or inheritances
  • Tax-free contribution for partnership interest
  • Transfer of property pursuant to tax-free corporate reorganization
state reporting requirements25
State Reporting Requirements

West Virginia Department of Tax and Revenue

Nonresident Real Property Owner

Withholding Tax

WVC Section 11-21-71b

requirements
Requirements:
  • Effective January 1, 2008
  • “Real estate reporting person” must withhold 2.5% of net proceeds of sale paid to a nonresident individual or entity (or 6.5% of estimated capital gain)
  • Must be paid to Tax Commissioner within 30 days
  • “Real estate reporting person” is person responsible for closing the transaction (including attorney or title company)
exemptions27
Exemptions:
  • No withholding is required if:
    • Transfer pursuant to foreclosure or deed in lieu of foreclosure
    • Transferor is US, the state, or a unit or political subdivision of the state
    • Certification that property is transferor’s principal residence (certification in deed or recorded affidavit required)
    • Consideration is zero
slide29
SDN
  • Specifically Designated Nationals (SDN) List, maintained by the United States Department of the Treasury at http://www.treasury.gov/offices/enforcement/lists/
  • Last updated November 5, 2007 (updated frequently, often weekly)
  • FINRA search engine link on our webpage at www.fidelitymidatlantic.com in the Underwriting Tab under Patriot Act searches
  • Affiliates of Fidelity National Financial, FNF’s direct operations and EC Purchasing members can use the SDS Patriot Search at a discount- $2.00/name at www.patriot-search.com
sdn patriot act terrorist act search
SDN – Patriot Act – Terrorist Act Search
  • IT IS THE RESPONSIBILITY OF EVERY SETTLEMENT AGENT TO CHECK THE SDN LIST FOR THE PARTIES INVOLVED IN THEIR TRANSACTION.
  • If you find a name which matches up on the list, you should follow the OFAC checklist, and contact the hotline at 1-800-540-6322
good funds
GOOD FUNDS
  • Reminder: Do not record or release any funds or wires until you have confirmed funds in your account.
real estate fraud
Real Estate Fraud
  • IRS Criminal Investigations:
    • Property flipping
    • Two sets of settlement statements
    • Fraudulent qualifications
judgment affidavits
JUDGMENT AFFIDAVITS
  • What is “due diligence”?
  • When do you accept a judgment affidavit without further inquiry?

When in doubt, call local counsel for approval!

bankruptcy court records
Bankruptcy Court Records

PACER SYSTEM

http://pacer.psc.uscourts.gov

society of combat counsel eligibility requirements
Society of Combat CounselEligibility Requirements
  • Must have litigated a neighbor dispute.
  • Must never have been adverse to Fidelity.
  • Must pass a secret ballot.
  • Can’t be a bad person,

AND………..

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