- quote -

I paid 650 pounds when bought my house in UK. I mean, from
my perspective, all the transaction fee I paid are (except
some incidental outlay e.g. banking transfer fee etc):

in UK: 650 pounds (including the 20 pounds "insurance" to
the Law Society)
in US: 750 dollar (lawyer fee) + 2800 dollars (title insurance)

- quote -

Are you sure about this? All I was told (not only from the
agent) was when I paid off the mortgage, I had to buy a
insurance to cover myself. The title insurance company will
say there is one more risk, naming the removal of the
mortgage lien, so they have to charge more. Even though I
was told the new policy will cost a lot less. But from my
perspective, I still have to pay some dollar again!

Also, pay-off the mortgage is to some extent same as
refinance. In the re-finance case, your previous lender
ceased to have ownership/lien interest on your property,
then your new lender owns the interest. In pay-off case,
you are the "new lender" who owns all the ownership of the
property.

- quote -

I am in CT. So you don't use a lawyer when buying a house
in CA? To me, I don't care about the name of these
service/charges. It's just a transaction cost I have to
pay.

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"My interest" <myinterest[at]gmail.com> wrote:
- quote -

The bulk of the cost is for the title search, to make sure
the owner really is the owner and that there are no liens or
other problems. Title companies serve that purpose. Instead
of charging by time like lawyers do, they charge based on
the value of the property, since their liability is based on
that. But the numbers turn out roughly equivalent.

The solicitors in the UK that I know who do conveyancing
charge, as I recall, between £500 and £1000. Have you had a
different experience?

- quote -

If you're talking about a refinance, that's the way it
works. If you're buying a property the title insurance
should protect you. Sounds like your real estate agent did a
horrible job.

- quote -

I don't know what state you're in, but that's something I
haven't seen in California - lawyers are simply not used in
conveyancing transactions unless there's a problem.

- quote -

Either the lawyer or the real estate agent or both. Tell
them you expect them to pay the IRS, and if they don't
cooperate, get yourself another lawyer.

Stu

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Stuart A. Bronstein wrote:
- quote -

Yes. I agree that from the legal perspective, I am on the
spot. What I was talking about was that such law might be a
"legalized rip-off of an innocient people" at least from the
moral and common sense perspective.

Certainly I, as an indivdual, is not as powerful as the
government, otherwise I would not allow IRS to force me to
do a free service for its incapability for only being fined.
(BTW, the penalty rate is around 80% annually! We are
always talking about credit card rate is rip-off, but that's
usually only about 20-30%.)

----------------------------
- quote -

How come the cost will be end-up the same? In addition to
the lawyer fee, I only paid roughly 30 dollar in UK to
insurace against laywer's fault, but I paid $2800 here.
Also interesting enough, the title insurance I paid for here
only protected the mortage bank, not me. If say I paid off
all my mortgage, I have to buy another title insurance (no
matter how much it will cost, expensive or cheap) because
the previous one will expire! So from my perspective, I was
forced to pay $2,800 to protect others (i.e. the bank) for
the possible mistake others (the lawyer) might make.

Also, the small print of the titlte insurance policy said
"up to 60% of the premium will be paid to the lawyer for
his/her service". So I wonder how much is the real cost for
the insurance itself? (I don't have any statistics, but
will be very interested to know how many residential title
claims really happen and the cost to title insurer v.s. the
total premium all the consumers have paid.)

------------------------------------------------------------
- quote -

As a law binding people and understand that there are many
different laws in different countries, I usually read all
the legal documents I received. Also, I will be very
surprise that all my non-US friends/colleagues here will
have all missed such information available to them
officially. So I would say there is not such notice.

Let's say you are driving at 50mph on a highway without any
special speed limit sign. A police stops you for speeding
because the speed limit on this portion is actually 40mph,
even though everywhere else has 55mph. How does this sound
to you?

------------------------------------------------------------
- quote -

I am not asking for a waive of law. All I am asking is a
law that is fair and justic and an authority that is
responsible.

I want to be a good citizen thus I don't need others to tell
me not to kill. This is because murdering is a common sense
crime and it's a well recongized principle by all civilized
human-beings. However I should not have the burden to
follow and study every detailed law some people draw as part
of their full-time jobs, esepcially if these regulations
prohibit something which may not be regarded as a criminal
conduct as a common sense. (e.g. report change of address
--- after all I am not a criminal and I think I am living in
a free world).

So is the purpose of the law is to maintain fairness and
justice in the society (i.e. good people get protected, bad
people get punished)? .. or it's a tool to increase
govenment income by punishing innoncient citizens?

Moderator:
You have a strong case against your attorney and possibly
the title company. An attorney would have to address this,
but I believe attornies who cease to practice are suppose
to purchase a "Tail Insurance" policy to cover suits
arising later. Your attorney most likely has assets you
can get to cover your loss.

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"My interest" <myinterest[at]gmail.com> wrote:

- quote -

Unfortunately the law doesn't see you as the innocent party.
You had a legal obligation and you failed to perform it.

Now, if your lawyer or real estate agent should have warned
you about that and didn't, you have a right to get any
penalty back from them. But as far as the IRS is concerned,
you're the one they are looking at.

- quote -

Generally the places that have title insurance allow people
to use that instead of, not in addition to a lawyer. The
cost ends up being about the same in both cases. The
difference is whether you sue an insurance company for
failing to pay under a policy or sue a lawyer for
malpractice. Suing the insurance company is easier, if you
have to.

- quote -

They're not required to inform you "officially." If you had
an immigration lawyer he should have told you. You may well
have received voluminous documents that you may not have
bothered to read because there was so much, that had exactly
that information.

- quote -

In the laws of every country of which I am aware, ignorance
of the law is no excuse. That is to say that it is your
responsibility to know the laws that affect what you do, and
you are liable for failure to do so, even if you did not
actually know what the law specifically said.

Stu

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Law is a law, we should obbey. But at the same time, the
law should be fair in the first instance. It should not be
designed in such a way that an innocient person will get
penalized (such as my case). If so, it's a bad law and only
serve the interest of a special group. Personally I feel
it's not because those wealthy/powerful politician cannot
find a better solution, it's because they don't bother (or
don't care?)

Since there seems to be some interests, I'd like to give few
more examples (among others!):

1. Title insurance. If I paid a lawyer to check the title
history (which argueably is a public information) and he
made a mistake, who should bear the responsibility? Force
the buyer to pay hundreds, if not thousands, of dollars to
buy this insurance is totally rip-off. To be fair, title
risk is a common risk in all the countries where property
transaction is allowed (i.e. it's not unique to US). There
are better solutions readily available elsewhere. For
example, in UK, all the buyers will be required to pay a
small fee (~$30) which will go to Law Socity (kind of Bar
Association equivelant) to fund a special insurance. In
case of a title dispute, the lawyer who handled the case
will be responsible. In case he fails to meet his
liability, the Law Society will guarentee the liability.

2. There is a law which requires all the alien resident to
report address change while in US. This is fine. But the
problem is, nobody has informed me officially. The first
time I heard this requirement was from my colleague when I
told him I moved to a new place. So again, I might be
punished for being innocent! If the immigration put a stamp
or notice on my passport and I failed to comply, it would be
my problem. But if nobody told me, that's a different
story.

3. People are talking about social security crisis here.
May I suggest a simple solution? First, treat divident etc
the same way as wage from the SSN taxable basis. Second,
instead of the current 6% till 90K ceiling, let's tax 5% for
income up to 90% and 1% afterward. By doing this, most low
income people will be better off, middle class will break
even and rich people will pay more.

I still well respect US as a country an its legal system.
As somebody mentioned earlier, an American may find lots of
strange things if he visits a foreign country. But as a
person who has been living and working in some different
countries (e.g. UK, Switzerland, Japan etc), I personally
think there are few examples of "legalized rip-off" in this
country I have seen in other developed countries.

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- quote -

Well, how to effectively collect tax from non-resident is
not my concern as an individual. It's the government's
responsibility. They are paid by all tax payers to ensure
the fairness. If we believe "an individual should be as
powerful as the government", then it's bogous for the
Congress to force me to collect the tax on behalf just
because it cannot find a better way .... especially I may
risk being penalized without any benefit.

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My interest wrote:

- quote -

Well, if you are able to come up with a way for taxing
authorities in various countries to enforce their tax laws
without withholding at the source for nonresidents or
noncitizens located offshore, my hat is off to you.

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Whatever the merits (or demerits) of the withholding system
are, it's not the fault of the IRS but rather Congress.
Congress decided long ago that it didn't trust non-residents
to pay their tax bills and instead imposed a withholding tax
that the buyer is required to withhold out of the proceeds
to be received by the seller and remit that amount to the US
Treasury.

BTW, as a measure of protection, if you, as buyer, had
withheld those taxes, the seller would have had no recourse
against you (other than to have not entered into a sales
contract with you in the first place - once the contract is
executed, you as buyer could have forced the seller to
perform the contract, so the seller could not have backed
out once it became clear that you were going to withhold).

As to your legal costs - if the seller isn't willing to pick
those up as well, then consider a malpractice claim against
both attorneys, yours and the sellers, the FIRPTA filing
requirements are so much an integral part of any real estate
transaction that a lawyer who fails to make sure that his
client complies with them has probably committed per-se
legal malpractice (but, that's just my opinion, not a legal
opinion or authority based on any case-law research). If
you can't get satisfaction out of the seller or any of the
attorneys, the additional costs go into your basis for the
property you bought, and get recovered later when you sell
(or, to the extent depreciation is allowed, partly through
depreciation of a higher basis).

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"My interest" <myinterest[at]gmail.com> wrote:

- quote -

Welcome. Stay long enough and you'll get to be a pro at
complaining about taxes. Don't believe that stuff you hear
about baseball. Whining about taxes is our national
passtime.

- quote -

First, you need to understand that IRS just administers the
laws that Congress writes. You do, however, have it right
about why Congress imposed the FIRPTA withholding
requirement.

- quote -

Yes, you are forced to do it for them, and no, you can't
bill them for it. Neither can employers bill them for
withholding payroll taxes.

- quote -

No, your lawyer is responsible, as you've already noted. He
got paid to know this stuff, not you.

- quote -

Life is sometimes unfair.

- quote -

Now don't take on those "Ugly American" attitudes that
people in Europe complain about. Were I to be plopped in a
foreign country I'm sure I'd find a lot of strange goings on
myself. We could start with royalty.

--
Phil Marti
Clarksburg, MD

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"My interest" <myinterest[at]gmail.com> wrote in news:12p6lc4rhnbg1a4

- quote -

I'm a biochemist, not a lawyer, but in most countries,
ignorance of a law does not excuse one of the obligation to
follow that law. Actually, that's (IMHO) one of the more
useful aspects of a lawyer, i.e. pointing out to the client
what needs to be done to satisfy the laws.

Therefore, it seems to me that your seller and his lawyer)
neatly evaded the law (and he is difficult to get at because
of being a non-resident). Since apparently both of you,
and/or both of your lawyers, are responsible for this 8288
form filing, legally you are left holding the bag.

Again, not being a lawyer, I think your combined lawyers
were hired to prevent this kind of thing from happening.
They didn't perform their obligations. So maybe you should
turn all this over to them to fight about. Maybe it is time
to hire another lawyer ...

--
Best regards
Han
email address is invalid

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My interest wrote:

- quote -

Welcome to the US!

- quote -

You seem to have had a baptism by fire here, and as you've
found out, the IRS has all the cards. Presumably, you're in
one of those states that thinks lawyers are the only
individuals intelligent enough to transfer a house; in my
state, that payment would have been handled in escrow by
less highly-paid people and you'd not have had such trouble.

For a foreigner, the IRS's behaviour must seem bizarre. The
system is euphemistically described as one of "voluntary
compliance", where the taxpayer is expected to do all the
work. Naturally, since little of this burden falls upon the
IRS, the tendency is to ever-increasing complexity and as
you've found out, sometimes even other peoples' tax bills
that you end up responsible for which no sane person would
have anticipated in advance.

- quote -

It is nonsense, but makes sense from the government's point
of view. Remember, in general, if you make an error in their
favour, you'll most likely not hear a word. If you make an
error in your favour, you'll typically hear about it just
before the statute of limitations expires to maximize the
penalty and interest payments they'll tack on as well.

Here, you've just made an error in someone else's favour,
and as a courtesy they're not hitting you up for penalties
and interest.

See how compassionate they can be?

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Thanks for all the responses. My lawyer has hired a tax
lawyer to deal with IRS on this matter. And it seems that
he may be willing to take the final penalty.

Frankly as a new comer to US, I was very surprised the way
IRS (and some other aspects) treats the tax payer.

Taking my case as an example. I guess the reason why IRS
imposes the W/H duty on buyer is because it cannot easily
enforce the seller to pay. However the point is, IRS is
after the wrong person! To me, IRS simply "legalizes" its
incapacility by forcing sb else to do the job for him, free
of charge. (Can I bill IRS for providing the tax collection
service to it?) From my perspective, I hired a licensed
lawyer to do the legal work. But I am responsible for his
mal-practice which ultimately is because of IRS'
incapability. If, for whatever reason, my lawyer is
out-of-business, I will be penalized for being totally
innocient.

This is just one example (if anybody is interested, I can
give more examples). I don't know what you guys as
long-term US residents think about this, but all these look
non-sense to me.

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My interest wrote:

- quote -

I am totally not an expert on this so I went to the IRS
website. According to what I read, the W/H rate is 10%. If
the tax was $17,800 as mentioned above, then the purchase
price was $178,000. (This would equate to the "amount
realized" mentioned on the IRS site). There is an exception
to W/Hing if the purchase is for a primary residence and the
purchase price is "not more than $300,000".

So, is this your primary residence? According to the IRS
site, a house will qualify as a primary residence under the
following conditions:

BEGIN QUOTE
You or a member of your family must have definite plans to
reside at the property for at least 50% of the number of
days the property is used by any person during each of the
first two 12-month periods following the date of transfer.
When counting the number of days the property is used, do
not count the days the property will be vacant.
END QUOTE

There are many more exceptions at the following link:

http://www.irs.gov/businesses/small/...102254,00.html

Following is the tiny URL

http://tinyurl.com/y2rdfa

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A.G. Kalman wrote:
- quote -

[...]
- quote -

Interesting escrow company scam. By comparison, the same
thing can happen domestically. In a recent residential real
estate closing in California, which also requires the buyer
to handle CA state tax withholding, the escrow company put a
charge on the sellers' bill to provide the paperwork for the
withholding. When challenged why the seller should pay for
something that was the buyer's legal responsibility, the
escrow agent said, "Oh, no one has ever asked that
before...".

-Mark Bole

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My interest wrote:

- quote -

Not the seller's lawyer. The buyer is responsible for
withholding the tax due on the sale and remitting the amount
to the IRS usually within 20 days of the sale. This is
usually handled by the title or escrow company that is
handling the closing. Either way, you as the buyer are
responsible. You may have a claim against the individual or
firm that represented you at the closing.

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I am a US resident and bought a house in July. Yesterday I
received a letter from IRS which imposed $17,800 penalty and
$2,437 interest. After spending the whole morning on the
phone and spoke to 10+ IRS agents, I found out that it was
because the seller of the house was not a US resident and
the seller's lawyer (or combination of my lawyer and the
seller's lawyer) didn't file the 8288 form in time as
required by the law.

I have talked to my lawyer and he is working with the
seller's lawyer to see whether they can persuade IRS to
cancel the charge. However I browsed the IRS website and
discussed with an IRS agent, aparantly I was legally liable
for this charge even though I was innocent in this whole
process.

So I hope the two lawyers can work out something with IRS.
But my question to this group is, in case IRS still insist
on some penalty/interest on me (either in full which is
$20K+ or part of that as a deal), what option do I have?

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