Title agents live in the land of edge cases. And FIRPTA? FIRPTA is the undefeated heavyweight champion of edge cases.

Here’s one we see all the time at Foreign Tax CPA — and if you handle closings involving foreign sellers, you’ve probably faced some version of it yourself.

A foreign client is selling a vacant lot in an RV community. The buyer plans to park her own RV on the lot and live there during the winter months. Sensible plan. Practical. Human.

So the question comes:

“Can the buyer sign a FIRPTA residential use affidavit and eliminate the 15% withholding?”

It feels logical. She’s going to live there. It’s residential. Case closed… right?

Not quite.

Under the Internal Revenue Code, the residential exemption from FIRPTA withholding only applies when the buyer intends to use the property as a residence and the property actually qualifies as residential real property at closing. Vacant land does not meet that standard. Even if the buyer plans to place a home — temporary or permanent — on the land after closing.

The IRS position is simple and unromantic: on the date of closing, no one can live “in” the land.

Intent doesn’t override the condition of the property at transfer.

That means vacant land sales involving foreign sellers remain subject to the standard 15% FIRPTA withholding requirement unless a withholding certificate is obtained in advance from the IRS.

For title insurance agencies, this distinction matters. A mistaken residential affidavit on vacant land can expose your office to liability for the uncollected tax. The IRS doesn’t pursue the seller first — it pursues the withholding agent. And in most transactions, that’s you.

This is where clean process protects everyone.

When the exemption doesn’t apply, the focus shifts from avoidance to execution:

• Proper preparation of Form 8288 and 8288-A
• Accurate calculation of withholding
• Timely remittance to the IRS
• Coordinated post-closing filing to secure the seller’s refund

With correct reporting, many foreign sellers recover all or a substantial portion of the withheld funds. The key is filing the right return, at the right time, with the right supporting documentation.

That’s the difference between a routine closing and months of confusion.

At Foreign Tax CPA, we work directly with title companies, settlement agents, and foreign sellers to handle FIRPTA compliance from start to finish — including Individual Taxpayer Identification Number (ITIN) applications, withholding certificates, and post-closing refund filings.

When questions arise — and they always do — you don’t need guesswork. You need clarity.

Vacant land is vacant land under FIRPTA.
Intent does not create an exemption.
Process protects the file.

If you encounter foreign tax filing requirements in your next transaction, our team is ready to assist.

We’re the FIRPTA Fixers — and we make sure your closing stays clean.