Failure by purchaser to withhold taxes from foreign person

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Reference no: EM131467348

Which of the following statements is false?

A. The tax code requires the buyer or his agent to withhold Federal income taxes from the sale proceeds belonging to a foreign (non-resident alien) seller of US real estate unless the foreign person meets at least one of several possible narrow exemptions.

B. Failure by a purchaser to withhold taxes from a foreign person who sells US real estate may result in the purchaser being liable for any federal income tax owed by the foreign person.

C. Because interest paid on a loan to finance the construction of real property during the construction period (other than real estate that constitutes inventory) is for the forbearance of money and not a direct cost of constructing the building, it may be deducted currently in the year it is incurred if you are an accrual basis taxpayer.

D. While real estate is under construction, a taxpayer need not capitalize, and may deduct as an expense currently in the year incurred, research and development costs, as well as advertising and marketing expenses for the property.

Reference no: EM131467348

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