Reform of the U.S. Tax Code and the Foreign Investment in Real Property Tax Act

A proposal to amend the Foreign Investment in Real Property Tax Act (FIRPTA) found its way into President Obama’s annual budget submission to Congress earlier this year. The proposal would exempt gains of foreign pension funds from the disposition of U.S. real property interests. Under current FIRPTA law, gains of foreign investors from the disposition of U.S. real property interests are generally subject to U.S. tax. President Obama’s proposal would exempt foreign pension plans from the tax. A foreign pension fund would mean a trust, corporation, or other organization or arrangement that is created or organized outside of the U.S. and substantially all of the activity of which is to administer or provide pension or retirement benefits. Under the President’s plan, non-pension, foreign investors would still be subject to the FIRPTA tax. By Tony Roda.

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