Liquidation - US Domestic Corporation

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Domeani
Posts: 30
Joined: Wed Jul 08, 2020 12:29 am

Liquidation - US Domestic Corporation

Post by Domeani »

On page of - https://www.irs.gov/pub/irs-pdf/p515.pdf - it says:
Domestic corporations. A domestic corporation must withhold tax on the fair market value of the property distributed to a foreign
shareholder if:
• The shareholder's interest in the corporation is a U.S. real property interest, and
• The property distributed is either in redemption of stock or in liquidation of the corporation. The corporation must generally withhold 15% of the amount realized by a foreign person.

Question:
For a Canadian citizen and resident does filing a W-8BEN avoid this 15% withholding? I find it hard to read https://www.irs.gov/businesses/internat ... -documents to find an answer. If not, is any of this withholding recoverable from the IRS?
Domeani
Posts: 30
Joined: Wed Jul 08, 2020 12:29 am

Re: Liquidation - US Domestic Corporation

Post by Domeani »

I believe I have misinterpreted Publication 515. That section I quoted is related to [i]U.S. Real Property Interest[/i] on pg 48. The US domestic corporation in question has no real property (real estate) interest, it is a software company that is liquidating. Thus I'd think liquidation, and distribution, incurs no withholding tax. Similar to selling a US publicly traded stock (ie. there is no withholding on proceeds of disposition). I don't believe there is even a requirement to file a W-8BEN. Happy to be corrected/informed. Thank you.
Domeani
Posts: 30
Joined: Wed Jul 08, 2020 12:29 am

Re: Liquidation - US Domestic Corporation

Post by Domeani »

Further info on this liquidation. It sounds like it will be paid three dividends over three years. So I do have to file a W-8BEN.

For a Canadian citizen and resident with both an SSN and SIN, which is used in the W-8BEN? Does it even matter? Should there only be one tax number included on the form? I don't find the IRS instructions crystal clear.

If a private US corporation is liquidating by providing dividend payments over time (from an asset sale that get paid over time) do they withhold taxes just like a US stock in an unregistered Canadian brokerage account? Without the W-8BEN one pays 30% FWT, and with 15% FWT.
Domeani
Posts: 30
Joined: Wed Jul 08, 2020 12:29 am

Re: Liquidation - US Domestic Corporation

Post by Domeani »

I was able to discover that the liquidation event over time was not equivalent to being paid dividends, which makes sense. It is a gain (or loss) of liquidation proceeds vs. adjusted cost basis of stock ownership. I post in case someone else ends up in a similar situation.
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