Favourable US Tax Withholding Treatment - 871(d) Election vs. Form W-8ECI

David2272

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Sep 19, 2012
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Presently I file personal US tax returns for a US rental property (purchased 2010 in my personal name). To date I've never had to pay any income tax (fed or state).

I've filed an IRS Form W-8ECI with the property mgmt company so they don't do any tax withholding on their monthly rent remittances to me.

Being I have a Form W-8ECI in place, is a 871(d) election still required to get favourable tax withholding treatment (i.e. on net gain vs gross proceeds) upon future sale of the property? I have not made such election to date.

Thanks very much for any insights.
 

Steve S

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May 8, 2015
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David, I do not have the answer to your post, but I am interested in investing in the US as well.
Have you contacted a US tax accountant or cross border attorney?
Peter Cutini at BDO may help as he is from Chicago practicing here. You can also try Altro Levy attorneys for cross border issues.
 

Albert710

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Apr 30, 2015
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This past November, 2016, I listened to a webinar on US taxes for nonresident aliens. The presenter did talk of the election under 871(d) of the US tax code and stated that this election should be made. His take on it was that there are two types of income FDAP (Fixed, determinable, annual or periodic income) and ECI (effectively connected income). Rental income for nonresident aliens are, by default FDAP. FDAP income allows for no deductions so your rental expenses might be disallowed without inserting the election. What does the election do? It elects that the rental income would be treated as ECI which allows for deductions.

Here is a sample of the election that was proposed by the presenter.

Taxpayer is the owner of the entire fee of a parcel of land, with improvements thereon, loacted at Main Street, Caspertown, MN 43535 acquired on May 3, 20XX.

The above parcel of land is improved with a commercial building that is used as a warehouse. The taxpayer has not previously revoked or made a new election under Code 871(d) or Reg. 1.871-10 with regard to this parcel.

Signature:_________________________________________


Caution: I am only communicating the information received in the webinar to REIN members. Please do not consider this as tax advice. This having been said, it might be a topic which you would review with your accountant when preparing your 1040NR tax return.

P.S. I should have just said read Peter Cuttini's US and LP question thread which is more complete!
 
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