The combination of a weak U.S. dollar and low interest rates has resulted in more foreign investment in U.S., and South Florida, commercial real estate. But one of the primary obstacles facing foreign persons who invest in U.S. real estate is the Foreign Investment in Real Property Tax Act (FIRPTA), more specifically Section 897.
Under this provision, any gain recognized by a foreign person on the disposition of a U.S. real property interest will be treated as if such gain were effectively connected to a U.S. trade or business. Therefore it would be subject to U.S. federal income tax at the graduated rates that apply to U.S. persons.
