[Code of Federal Regulations]
[Title 26, Volume 12]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1445-7]

[Page 198]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1445-7  Treatment of foreign corporation that has made an election 
under section 897(i) to be treated as a domestic corporation.

    (a) In general. Pursuant to section 897(i) a foreign corporation may 
elect to be treated as a domestic corporation for purposes of sections 
897 and 6039C. A foreign corporation that has made such an election 
shall also be treated as a domestic corporation for purposes of the 
withholding required under section 1445, in accordance with the 
provisions of this section.
    (b) Withholding under section 1445(a)--(1) Dispositions by 
corporation. A foreign corporation that has made an election under 
section 897(i) may provide a transferee with a certification of non-
foreign status in connection with the corporation's disposition of a 
U.S. real property interest. However, in accordance with the provisions 
of Sec. Sec. 1.1445-2(b)(2)(ii) and 1.1445-5(b)(3)(ii)(C), such an 
electing foreign corporation must attach to such certification a copy of 
the acknowledgment of the election provided to the corporation by the 
Internal Revenue Service pursuant to Sec. 1.897-3(d)(4) which states 
that the information required by Sec. 1.897-3 has been determined to be 
complete.
    (2) Dispositions of interests in corporation. Dispositions of 
interests in electing foreign corporations shall be subject to the 
withholding requirements of section 1445(a) and the rules of Sec. Sec. 
1.1445-1 through 1.1445-4. Therefore, if a foreign person disposes of an 
interest in such a corporation, and that interest is a U.S. real 
property interest under the provisions of section 897 and regulations 
thereunder, then the transferee is required to withhold under section 
1445(a).
    (c) Withholding under section 1445(e). Because a foreign corporation 
that has made an election under section 897(i) is treated as a domestic 
corporation for purposes of determining withholding obligations under 
section 1445, such a corporation is not subject to the requirement of 
section 1445(e)(2) that a foreign corporation withhold at the corporate 
capital gain rate from the gain recognized upon the distribution of a 
U.S. real property interest. Such a corporation is subject to the 
provisions of section 1445(e)(3). Thus, if interests in an electing 
corporation constitute U.S. real property interests, then the 
corporation is required to withhold with respect to the non-dividend 
distribution of any property to an interest-holder that is a foreign 
person. See Sec. 1.1445-5(e). Dividend distributions (distributions 
that are described in section 301) shall be treated as provided in 
sections 897(f), 1441 and 1442. In addition, if interests in an electing 
foreign corporation do not constitute U.S. real property interests, then 
distributions by such corporation shall be treated as provided in 
sections 897(f) (if applicable), 1441 and 1442.

(Approved by the Office of Management and Budget under control number 
545-0902)

[T.D. 8113, 51 FR 46650, Dec. 24, 1986; 52 FR 3796, Feb. 6, 1987]