TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, April 22, 2004

Brown on FIRPTA

Thursday, April 22, 2004

Fred Brown (Baltimore) has posted Whither FIPTA? on SSRN. Here is the abstract:

It is commonly understood that the tax law is composed of a complicated and interrelated set of statutory provisions. This raises the possibility that changes to one area of the law may necessitate revisions to other areas. While statutory change sometimes means that other provisions need to be added or amended, there is also the possibility that the enactment of a new provision allows for the repeal of another rule because it is either deadwood or simply no longer sensible in light of the rule's intended purpose as well as fundamental tax policies.

A simplification study released by the Joint Committee on Taxation in 2001 indicates the prevalence of this deadwood (and the like) phenomenon. This study recommends the repeal of 105 provisions identified as pure deadwood. The study also proposes the elimination of other provisions that no longer serve sound policy objectives as a result of tax law changes since their enactment. Given the tax law's interrelated statutory scheme and frequent changes, the extent of the deadwood phenomenon should come as no surprise.

An area that is ripe for such a deadwood analysis is the Foreign Investment in Real Property Tax Act ("FIRPTA"), and in particular section 897. Indeed, FIRPTA has been ripe for such an analysis since the changes effected by the Tax Reform Act of 1986. This Article suggests that the repeal of portions of FIRPTA may be in order and sets forth an analysis of the various considerations in arriving at this conclusion.

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A FIRPTA question. If the land is owned by a nonresident alien (foreign person) but the commercial building which sits on the land is owned by a U.S. Corporation, when the land and building are sold simultaneously to the buyer, are the proceeds of the sale of the building subject to FIRPTA withholding? For tax purposes, the building and land have been valued separately.

Posted by: Donald Hidani | Jun 17, 2008 8:31:53 PM