An entity or fiduciary is not required to rely upon other means to ascertain the non-foreign status of an interest-holder and may demand a certification of non-foreign status. If the certification is not provided, the entity or fiduciary may withhold tax under section 1445 and will be considered, for purposes of sections 1461 through 1463, to have been required to withhold such tax.
An acknowledgment is valid for this purpose only if it states that the information required by § 1.897-3 has been determined to be complete.
Similarly, no withholding is required under paragraph (c) or (d) of this section upon an entity's transfer of an interest in a publicly traded partnership or trust. However, the rule of this paragraph (b)(4)(ii) shall not apply to the transfer, to a single transferee (or related transferees as defined in § 1.897-1(i) ) in a single transaction (or related transactions), of an interest described in § 1.897-1(c)(2)(iii)(B) (relating to substantial amounts of non-publicly traded interests in publicly traded corporations) or of similar interests in publicly traded partnerships or trusts. The entity making a transfer described in the preceding sentence must otherwise determine whether withholding is required, pursuant to section 1445(e) and the regulations thereunder. Transactions shall be deemed to be related if they are undertaken within 90 days of one another or if it can otherwise be shown that they were undertaken in pursuance of a prearranged plan.
Such an entity's or fiduciary's withholding obligations shall apply as if a statement had never been given, and such an entity or fiduciary may be held fully liable pursuant to § 1.1445-1(e) for any failure to withhold. For special rules concerning an entity's belated receipt of a notice concerning a false statement, see paragraphs (c)(2)(iii) and (d)(2)(i) of this section.
On January 1, 1994, A establishes a domestic trust (which has as its taxable year, the calendar year) for the benefit of B, a nonresident alien, and C, a U.S. citizen. The trust is not a trust subject to sections 671 through 679. Under the terms of the trust, the trustee, T, is given discretion to distribute income and corpus of the trust to provide for the reasonable needs of B and C. During the trust's 1994 tax year, T disposes of three parcels of vacant land located in the United States. The following chart illustrates the computation of the amount subject to withholding under section 1445 with respect to distributions made by T to B and C during 1994.
Date | Parcel sold | Gains or (loss) realized | Distributions to C | Distributions to B (before withholding) | Section 1445 withholding 35% rate | U.S. real property interest account |
1/01/94 | -0- | |||||
3/01/94 | Parcel 1 | 140,000 | 140,000 | |||
3/05/94 | 5,000 | 10,000 | 3,500 | 125,000 | ||
3/15/94 | 10,000 | 5,000 | 1,750 | 110,000 | ||
5/01/94 | Parcel 2 | 300,000 | 410,000 | |||
5/15/94 | Parcel 3 | (50,000) | 360,000 | |||
12/01/94 | 170,000 | 170,000 | 59,500 | 20,000 | ||
1/01/95 | -0- |
Amounts so withheld must be reported and paid over by the 60th day following the date on which the partnership or fiduciary learns that the statement is false. For rules concerning the notifications of false statements that may be required to be given to partnerships or fiduciaries, see § 1.1445-4(b) .
An entity that elects to compute the amount subject to withholding under this § 1.1445-5(c)(3)(iv) , shall make such election in accordance with § 1.1445-5(c)(3)(vi) and shall be subject to the provisions otherwise applicable under § 1.1445-5(c)(3) .
An entity that ceases to qualify under section 1.1445-5(c)(3) because such entity does not have more than 100 partners or beneficiaries may revoke its election only with the consent of the Internal Revenue Service.
26 C.F.R. §1.1445-5
For FEDERAL REGISTER citations affecting § 1.1445-5 , see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.fdsys.gov.