Questions & answers

What taxes are generally payable after the sale and purchase of commercial real estate? Are there any exemptions for foreign buyers?

We are looking at the tax implications of investing in an office building in Texas or California. Knowing that taxes vary by location, we are looking at what tax advantages beyond FIRPTA generally we should anticipate for each location.


Answers
  • Sheri Chromow

    SPC Advisors, LLC
    February 21, 2018

    In order to answer this question more specifically, I would have to know more facts. The taxes a foreign investor has to pay may include payment of a transfer tax, depending on the laws and customs of the state. For instance, California has a transfer tax. Payment can be allocated between a buyer and seller. Beyond that, the facts and circumstances of your ownership, as structured by a competent professional, can create a tax-advantaged position. The investment may be partially debt as well as partially equity. I work with a first rate tax lawyer, who could work with you to devise the most favorable structure. However, earnings and gains will have some tax consequences.

  • Mark Drumm

    Managing Director, Regent Park Advisors
    January 31, 2018

    Beyond federal tax requirements, Texas is 0% while CA depends on other income. Should be easy for your tax attorney to verify.

  • Jessica Graf

    Seyfarth Shaw LLP
    January 31, 2018

    There may be transfer taxes that have to be paid and an apportionment of the real estate taxes will also be included. Going forward after the purchase, you would be fully responsible to pay all the real estate taxes along with taxes on any personal property at the location. I would recommend hiring a US-based accountant to advise you of all the tax implications based on your particular tax situation.

  • Glenn Mueller

    Black Creek Group
    January 25, 2018

    US Federal taxes are 20% on the gain on sale if held for 3 or more years. FIRTPA can be different for each country - depending upon the tax treaty.