FIRPTA With a Single-Member LLC Seller, and the Seller-Financing Cash Shortfall

Published October 9, 2026 · Recalde & Friedman, PLLC

Two common FIRPTA surprises

Our FIRPTA guide explains the basic rule: when a foreign person sells U.S. real property, the buyer must withhold 15% of the amount realized unless an exception applies (26 U.S.C. § 1445(a)). This article covers two situations that regularly cause last-minute problems: a seller that is a single-member LLC, and a seller that is financing part of the price.

Part 1: the single-member LLC

By default, a domestic LLC with one owner is disregarded as an entity separate from its owner for federal tax purposes, unless it elects to be treated as a corporation (26 C.F.R. § 301.7701-3 (entity classification)). For FIRPTA, that has a direct consequence:

• A disregarded entity can't certify that it is the transferor, because it isn't the transferor for U.S. tax purposes. The owner is treated as the transferor and must provide the certificate of non-foreign status (26 C.F.R. § 1.1445-2 (certification of non-foreign status; disregarded entities)(b)(2)(iii)).
• Any domestic entity that gives a non-foreign certification must include a statement that it isn't a disregarded entity.

In practice:

• If the LLC's single owner is a U.S. person, the owner signs the non-foreign certification, not the LLC. A certificate signed only "by the LLC" won't do the job.
• If the single owner is a foreign person, the sale is treated as a sale by a foreign person, and withholding applies, even though the LLC was formed in Florida.
• If the LLC has elected corporate treatment, or has more than one member, it isn't disregarded and the analysis changes. Ask the seller's tax advisor how the entity is classified.

The FR/BAR contract requires the seller to tell the buyer in writing if it's a foreign person (10(i)), and lets a non-foreign seller deliver a certification under penalties of perjury before or at closing (Standard V(i)). Get the ownership facts early. Closing agents typically ask for the LLC's operating agreement and ownership information, which is also needed to confirm authority. See LLC seller authority.

Part 2: seller financing and the cash shortfall

Suppose a foreign seller agrees to take a purchase-money note and mortgage for much of the price (Paragraph 8(d) and Rider C of the FR/BAR contract). The buyer brings a modest down payment. The seller's existing mortgage must be paid off. And FIRPTA withholding is 15% of the amount realized, which includes the financed portion.

The IRS instructions to Form 8288-B say it directly: a buyer must withhold on the full sales price regardless of the amount of the payment. The cash at closing may simply not cover the payoff, closing costs and the withholding.

How Standard V handles it

The FR/BAR contract anticipates the shortfall. Standard V(iv), FIRPTA Tax Withholding, says that if the seller's net proceeds aren't enough to meet the withholding requirement, the seller must deliver the additional collected funds at closing. The buyer then remits them to the IRS or escrows them under Standard V. Paragraph 10(i) warns that FIRPTA may require the seller to provide additional cash at closing.

Reducing withholding on an installment sale

The same IRS instructions explain that if the seller isn't a dealer and will report gain under the installment method, it may apply for a withholding certificate allowing reduced withholding, on conditions that include continued withholding as payments are received (IRS Form 8288-B and instructions (installment sales)). An application pending at closing is handled under Standard V(iii): the buyer withholds and either remits or escrows the funds pending the IRS decision. The IRS says it normally acts on an application within 90 days after receiving all the information it needs. Have the seller's tax advisor start this well before closing.

Checklist

1. Identify the true transferor. Is the LLC disregarded? Who owns it?
2. Is the owner a foreign person?
3. If withholding applies, compute 15% of the full price and compare it with the cash available after payoffs and costs.
4. If there's a shortfall, plan for the seller to bring funds, or pursue a withholding certificate early.
5. Coordinate with the closing agent on Forms 8288 and 8288-A. The buyer gives the seller copies of the forms as filed (Standard V(v)).

Frequently asked questions