SERVICE ALERTS FOREIGN PERSONS WITH INTERESTS IN PARTNERSHIPS, TRUSTS, OR ESTATES OF LIABILITY UNDER FIRPTA.

Notice 88-72

This notice alerts foreign persons who are partners, trust beneficiaries, or estate beneficiaries that they are subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), 1980-2 C.B. 524. United States income tax is therefore imposed when they dispose of an interest in the partnership, trust, or estate, on gain that is attributable to a United States real property interest (USRPI).

Section 897(a) of the Internal Revenue Code of 1986 imposes tax generally on the disposition of a USRPI by a foreign person, and section 897(g) extends this treatment to dispositions of an interest in a partnership, trust, or estate to the extent attributable to a USRPI held by the entity. Although section 897(g) specifically authorizes the Service to issue implementing regulations, the section is not contingent on regulations. It therefore applies to dispositions after June 18, 1980, pursuant to section 1125 of FIRPTA. Thus, when a foreign person receives cash or property in exchange for all or part of an interest in a partnership, trust, or estate, gain or loss will be recognized to the extent attributable to a USRPI.