[WSBARP] FIRPTA & LLCs

[Rich Holland]

I ran across a situation today which prompted a question in my mind that I could not readily find an answer for and since my firm on occasion closes the sale of property, I thought I would seek out some better formed opinions.

ABC, LLC is formed in Washington by Bob and John and has a registered agent service.
ABC, LLC has no assets.
ABC, LLC is sold by Bob and John to a pair of foreign investors.
ABC, LLC purchases a property and flips it.

Does FIRPTA apply to the sale?  Is the buyer at risk?  The IRS regs are confusing to me and seem to say that it depends on whether or not the LLC is a disregarded entity, treated as a partnership, or treated as a corporation.  That is all well and good when it comes to ultimate liability but it does not allow me to offer any practical advice on how a buyer can protect themselves.

You can easily complicate the issue with wondering how one finds out that the manager/members of ABC are or are not foreign investors for example and/or go overboard and demand that every LLC disclose its membership and have them all sign FIRPTA forms prior to a sale.

Sincerely,

Richard L. Holland

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733 7th Avenue, Suite 110
Kirkland, WA 98033
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