U.S. Real Estate Tax Planning
for Foreign Investors
FIRPTA, transfer tax, and structuring for non-U.S. persons acquiring, holding, and disposing of U.S. real property — from first acquisition through estate administration.
Advising foreign investors across the Americas and Europe on the full lifecycle of U.S. real property investment.
U.S. Real Estate Carries Significant Tax Complexity for Foreign Investors — Planning Must Begin Before Acquisition
U.S. real estate is one of the most popular investment classes for internationally mobile individuals and foreign families. But unlike domestic buyers, foreign investors face a distinct and often underappreciated set of U.S. tax obligations that attach at every stage of ownership: at acquisition, during the holding period, and upon disposition or death.
FIRPTA — the Foreign Investment in Real Property Tax Act — imposes a withholding tax of up to 15% of the gross sales price on dispositions of U.S. real property interests by foreign persons, regardless of the actual gain realized. U.S.-situs real estate held directly or through a U.S. LLC is included in a non-resident alien’s U.S. taxable estate — subject to U.S. estate tax at rates up to 40%, with only a $60,000 exemption for most non-resident aliens compared to the multi-million dollar exemption available to U.S. citizens. Rental income is subject to U.S. income tax, with the tax treatment depending entirely on whether a proper election has been made. And the structure used to hold the property — whether a direct purchase, a U.S. LLC, a foreign corporation, or a tiered structure — determines the tax consequences at every stage.
We advise foreign investors on the full lifecycle of U.S. real estate investment — from structuring the acquisition to minimize FIRPTA exposure, estate tax risk, and income tax on rental income, through planning for an eventual sale or transfer to heirs. For clients who already own U.S. real estate in an unplanned structure, we analyze the existing position and advise on restructuring options.
A Structured Approach Across the Full Investment Lifecycle
From acquisition structuring through estate administration — covering every U.S. tax dimension of foreign real estate ownership.
Acquisition & Structuring
- Entity selection — LLC, LP, blocker corporation, or direct ownership
- Two-tiered foreign/U.S. corporation structure analysis
- FIRPTA withholding analysis for the buyer and seller
- U.S.-situs asset classification — LLC interest look-through analysis
- Treaty-based structuring and reduced withholding rate analysis
Holding & Income Planning
- Rental income tax planning — Net Election under Section 871(d)
- Treaty-based exemptions and reduced rates on passive income
- U.S. income tax return advisory for NRA rental activity
- U.S. estate and gift tax exposure review — annual monitoring
- Property management structure review for PE risk
Disposition & Estate Planning
- Pre-disposition restructuring analysis
- FIRPTA withholding certificate application (Form 8288-B)
- Disposition planning to minimize withholding and gain recognition
- U.S. estate tax return preparation advisory (Form 706-NA)
- IRS transfer certificate procedures for frozen accounts
Who We Advise
We advise a broad range of foreign real estate investors — from individuals acquiring a single property to families with multi-property U.S. portfolios and complex succession planning needs.
Foreign Individuals Acquiring U.S. Residential or Commercial Property
Non-resident alien individuals purchasing U.S. residential or commercial real estate for personal use, investment, or eventual primary residence — requiring acquisition structuring, FIRPTA analysis, and estate tax planning from the outset.
Foreign Families with Multi-Property U.S. Portfolios
Internationally mobile families with multiple U.S. properties requiring coordinated portfolio structuring, ongoing income tax planning, and estate tax exposure analysis across the full holding.
Foreign Corporations and Investment Structures
Foreign corporations and holding structures acquiring U.S. real estate — requiring USRPHC analysis, blocker corporation planning, and treaty-based structuring to minimize withholding and estate tax.
Sellers of U.S. Real Property — Pre-Disposition Planning & FIRPTA Withholding
Foreign persons disposing of U.S. real property interests — requiring pre-disposition planning, withholding certificate applications, gain calculation, and analysis to minimize the FIRPTA withholding obligation on sale proceeds.
Non-Resident Alien Estates with U.S. Real Property
Estates of non-resident aliens who held U.S. real estate at death — requiring Form 706-NA preparation, IRS transfer certificate procedures, and coordination with the state probate process for U.S.-situs real property.
Existing Unplanned Structures
Foreign investors who acquired U.S. real estate without tax planning and now hold property in a structure that creates FIRPTA, estate tax, or income tax inefficiency — requiring analysis of the existing position and advice on restructuring options and their tax costs.
Technical Depth Across the Full U.S. Real Estate Tax Landscape
Depth across every U.S. tax dimension of foreign real estate ownership — from FIRPTA withholding to estate tax to rental income structuring.
FIRPTA Analysis & Planning
Comprehensive analysis of FIRPTA withholding obligations for buyers, sellers, and withholding agents — including USRPHC determination, applicable withholding rates, treaty-based exemptions, and withholding certificate applications (Form 8288-B) to reduce or eliminate withholding on sale proceeds.
Acquisition Structuring
Selection and implementation of the appropriate holding structure for each client’s investment objectives — LLC, LP, foreign corporation blocker, two-tiered foreign/U.S. corporation structure, or direct ownership — with analysis of the FIRPTA, estate tax, and income tax consequences of each approach.
U.S. Estate Tax Planning for Non-Resident Aliens
Analysis of U.S. estate tax exposure for NRAs holding U.S.-situs assets — including U.S.-situs classification of LLC interests, treaty-based estate tax relief, and structuring strategies to remove U.S. real property from the U.S. taxable estate.
Rental Income Tax Planning
Advisory on U.S. income tax treatment of rental income — including the Net Election under Section 871(d) to be taxed on net rental income at graduated rates rather than 30% gross withholding, and treaty-based positions that may reduce the withholding rate on rental income.
U.S. Situs Asset Classification
Analysis of whether specific assets — including interests in U.S. LLCs, partnerships, and corporations holding real estate — constitute U.S.-situs assets for estate and gift tax purposes, including the look-through rules that can cause LLC interests to be treated as U.S.-situs even when held through a foreign entity.
FIRPTA Withholding Certificates
Preparation and submission of Form 8288-B (Application for Withholding Certificate) to obtain IRS approval for reduced or zero withholding on a sale — including gain calculation, supporting documentation, and coordination with the closing.
Form 706-NA & IRS Transfer Certificates
Preparation advisory for Form 706-NA (U.S. Estate Tax Return for Nonresident Not a Citizen) for NRA decedents with U.S.-situs assets — and coordination of the IRS transfer certificate process required to release frozen U.S. financial accounts and facilitate estate administration.
Pre-Disposition Restructuring
Analysis of restructuring options before a sale — including conversion of holding structure, entity dissolution, and nonrecognition strategies — to minimize FIRPTA withholding, income tax on gain, and overall disposition tax cost.
Representative Matters
Select anonymized engagements. Prior results do not guarantee a similar outcome.
FIRPTA / FOREIGN INVESTOR ACQUISITION
United States / International
Structured U.S. real estate holdings for a foreign investor acquiring multiple U.S. residential properties through a tiered holding structure consisting of a foreign holding company and U.S. LLCs — advising on FIRPTA exposure, U.S.-situs asset classification, entity formation, income tax planning, and ongoing compliance obligations. Counseling conducted in French.
FIRPTA / CORPORATE RESTRUCTURING
United States / Europe
Advised a foreign corporation holding a U.S. real property holding corporation (USRPHC) that owned high-value U.S. residential real estate on the U.S. tax consequences of proposed restructuring options — including FIRPTA withholding analysis on capital contributions and membership interest transfers, evaluation of IRC nonrecognition exceptions under Section 1445, and structuring of a third-country intermediary financing arrangement.
NRA ESTATE / U.S. PROBATE
United States / Latin America
Advised the heirs of a Latin American decedent in a U.S. summary administration proceeding involving U.S.-situs real estate, multiple non-U.S. beneficiaries, and a parallel estate proceeding in a foreign jurisdiction — coordinating international service of process, advising on U.S. estate tax return obligations, and counseling on the U.S. income tax consequences of post-death transfers of U.S. real property among non-resident alien heirs.
NRA ESTATE / FORM 706-NA
United States / Europe
Prepared and filed Form 706-NA for the estate of a European decedent holding U.S.-situs assets — including coordination of certified translations of foreign notarial documents and submission of the full estate tax compliance package to the IRS. Coordinated the IRS transfer certificate process to release frozen U.S. financial accounts.
NRA ESTATE TAX PLANNING / U.S. SITUS
United States / Europe
Advised non-resident alien heirs on U.S. estate tax exposure for U.S.-situs assets held by a European decedent — including U.S.-situs asset classification analysis, application of the $60,000 NRA exemption, treaty-based estate tax analysis, and IRS transfer certificate procedures to release frozen U.S. financial accounts.
Frequently Asked Questions
What is FIRPTA and how does it affect me as a foreign buyer or seller of U.S. real estate?
FIRPTA — the Foreign Investment in Real Property Tax Act — imposes a U.S. withholding obligation on dispositions of U.S. real property interests by foreign persons. When a foreign person sells U.S. real property, the buyer is required to withhold 15% of the gross sales price (not the gain — the full price) and remit it to the IRS. This withholding applies regardless of whether there is any actual taxable gain, and it can result in substantial over-withholding on properties where the gain is small relative to the purchase price. The seller can apply for a withholding certificate (Form 8288-B) to reduce or eliminate withholding based on the actual gain, but this must be submitted to the IRS before closing and requires advance planning. From a buyer’s perspective, FIRPTA creates a potential liability: if the buyer fails to withhold, the buyer — not the seller — bears the withholding obligation.
How should I structure my U.S. real estate acquisition as a foreign investor?
The right structure depends on the investor’s objectives, tax residency, country of origin, and whether a U.S. tax treaty applies — but the core tension is between income tax efficiency and estate tax protection. A direct purchase in the investor’s own name is the simplest structure but provides no estate tax protection — the full value of the property is included in the U.S. taxable estate of a non-resident alien. A U.S. LLC provides liability protection and income tax flexibility but does not, by itself, remove the property from the U.S. taxable estate if the LLC interest is classified as a U.S.-situs asset. A two-tiered structure — using a foreign holding company to own a U.S. LLC or corporation — can remove the real estate from the U.S. estate tax base, but introduces FIRPTA complexity and a potential corporate-level tax on gain. Each structure must be analyzed against the client’s specific facts before acquisition, because restructuring after the fact carries its own tax costs.
Does a non-resident alien pay U.S. estate tax on U.S. real estate?
Yes — and the exposure is significant. Non-resident aliens are subject to U.S. estate tax on U.S.-situs assets, including U.S. real estate, at rates up to 40%. However, the exemption available to non-resident aliens is only $60,000 — compared to $13.99 million (in 2026) for U.S. citizens and residents. A non-resident alien who dies owning a $1 million property held directly in their own name would have U.S. estate tax exposure of up to $376,000 (40% of $940,000 above the $60,000 exemption). U.S. estate tax treaties with certain countries — including France, Germany, the UK, and others — can provide greater exemptions or credits, but these treaties are not uniform and must be analyzed individually. Proper structuring before acquisition is the most effective way to manage this exposure.
What is the Net Election under Section 871(d) and why does it matter for rental income?
By default, rental income paid to a non-resident alien is subject to 30% U.S. withholding tax on the gross amount — regardless of expenses, mortgage interest, or depreciation. The Section 871(d) Net Election allows a non-resident alien to elect to treat income from U.S. real property as income effectively connected with a U.S. trade or business — meaning the rental income is taxed at graduated rates on the net income after deductions, rather than 30% on the gross. For a property with significant mortgage interest, property taxes, depreciation, and management expenses, the Net Election can dramatically reduce the U.S. income tax burden. The election is made on the U.S. income tax return and, once made, applies to all U.S. real property income for that year and all future years unless revoked with IRS consent.
What happens to U.S. real estate when a foreign owner dies?
The estate of a non-resident alien who held U.S. real estate at death must navigate several U.S. tax and administrative requirements. First, a U.S. estate tax return (Form 706-NA) may be required if the gross value of U.S.-situs assets exceeds $60,000. Second, U.S. financial institutions — including banks and brokerage firms — will freeze accounts of a deceased non-resident alien pending receipt of an IRS transfer certificate confirming that estate taxes have been paid or secured. Third, U.S. real estate held in the decedent’s name must pass through the U.S. probate process in the state where the property is located. Fourth, the heirs must analyze FIRPTA implications if they intend to sell the inherited property. Coordination between U.S. tax counsel, U.S. estate counsel, and foreign counsel in the decedent’s home country is essential.
I already own U.S. real estate directly in my name. Can I restructure?
Yes — but restructuring must be approached carefully because the transfer of real property into a holding structure triggers its own tax consequences. A transfer of U.S. real property to a U.S. LLC or corporation by a foreign individual is subject to FIRPTA — the foreign person is treated as if they sold the property at its fair market value, and the LLC or corporation as the ‘buyer’ may be required to withhold. In many cases, restructuring can be done on a tax-deferred basis using nonrecognition provisions, but the applicability of these exceptions is fact-specific and requires careful analysis. The cost of restructuring — FIRPTA withholding, documentary stamp taxes, and potential capital gains recognition — must be weighed against the ongoing estate tax and income tax exposure of remaining in the current structure.
U.S. Real Estate Tax Planning Checklist for Foreign Investors
A practical guide for non-U.S. persons investing in U.S. real estate — covering acquisition structuring, FIRPTA withholding, estate tax exposure, rental income planning, and disposition considerations.
This checklist is provided for informational purposes only and does not constitute legal advice. No attorney-client relationship is formed by use of this resource. Every client’s situation is unique — this checklist does not substitute for a comprehensive analysis by qualified counsel. All engagements are subject to a conflicts check and execution of an engagement letter.