Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has provided a simplified method to request relief from late filings directly associated with the transfer of a U.S. real property interest. This corrective action is an alternative to the letter ruling procedure under Reg. §301.9100-3 for correction of untimely filings and no user fee is required. A taxpayer can request relief by applying for a letter ruling
only if the taxpayer is denied relief by the IRS under this simplified method. This simplified procedure applies to all requests for relief received after June 26, 2008. Taxpayers with ruling requests pending as of May 27, 2008, are not required to use this simplified procedure. However, taxpayers that have not received a determination of their ruling request as of May 27, 2008, may withdraw their request, receive a refund of their user fee, and then proceed under this simplified method.

  CCH Comment. Although the United States does not generally tax foreign persons on the sale of capital gains property that is not effectively connected with the conduct of a trade or business within the United States, there is an exception for the disposition of U.S. real property interests pursuant to Code Sec. 897. The gain or loss of a nonresident alien or foreign corporation from the disposition of a U.S. real property interest is treated as if the taxpayer were engaged in a trade or business in the United States and as if such gain or loss were effectively connected with such trade or business. A U.S. real property interest includes: (1) an interest in real property located in the United States or the Virgin Islands; and (2) any interest in a domestic corporation unless the taxpayer establishes that the corporation was at no time a U.S. real property holding corporation (USRPHC) during the period the taxpayer held the interest or within the 5 year period ending on the disposition of the interest. The transferee of a U.S. real property interest is generally required to withhold 10 percent of the amount realized by the foreign person on the disposition of the U.S. real property interest. The withholding requirement does not apply if: (1) the transferee receives notice from the transferor that the transferor is not required to recognize any gain or loss on the transfer pursuant to a United States treaty or a nonrecognition provision of the IRC and the transferee provides a copy of the notice to the IRS within 20 days of the transfer; or (2) the transfer is of an interest in a domestic corporation that is not a USRPHC and the foreign transferor obtains a statement to that effect from the corporation (and the corporation mails a copy of the statement to the IRS within 30 days after it is provided to the foreign transferor), or a determination from the IRS that the corporation is not a USRPHC, as of the date of the disposition.

Eligibility for Relief

  A taxpayer is eligible for relief for a late filing related to establishing that a corporation is not a USRPHC (statement from corporation and/or filing of same with IRS) or that nonrecognition of gain provisions under the IRC or a United States treaty apply (notification by transferee to transferor of nonrecognition of gain or loss and/or transferee notification to IRS). The taxpayer must show reasonable cause for his failure to make a timely filing.

Procedure

  The taxpayer must file the applicable completed statement or notice with the appropriate person or the IRS as soon as the taxpayer becomes aware of the failure to file. On the top of the statement or notice, the following must be printed: "FILED PURSUANT TO REV. PROC. 2008-27." For all notices or statements that must be filed with the IRS, the taxpayer must attach an additional statement explaining his reasonable cause for failure to timely file and state that any other statements or notices that apply have been provided to the appropriate parties.

Relief

  Upon receipt of a completed application, the IRS will determine whether the requirements for granting additional time have been satisfied. The taxpayer will be notified within 120 days of filing the application if the IRS determines that the failure to comply was not due to reasonable cause or if the IRS needs additional time to make the determination. The 120-day period begins on the date the taxpayer is notified in writing that the request has been received by the IRS and assigned for review. If the taxpayer is not again notified within the 120-day period, the taxpayer will be deemed to have established reasonable cause.

Rev. Proc. 2008-27, 2008FED ¶46,433

Other References:

 
Code Sec. 897

  CCH Reference - 2008FED ¶27,711.45

  CCH Reference - 2008FED ¶27,711.65

 
Code Sec. 1445

  CCH Reference - 2008FED ¶32,792.30

  Tax Research Consultant

  CCH Reference - TRC INTLIN: 6,050
CCH Reference - TRC INTLIN: 6,100