The Complete FIRPTA Glossary: Terms Every Seller Should Know

The FIRPTA process involves tax law, IRS forms, real estate, and immigration status (and each area comes with its own terminology. Use this glossary as a reference when navigating your DVC sale and FIRPTA refund.

A

Adjusted Cost Basis

The original purchase price of your DVC contract plus qualifying acquisition costs (title fees, recording fees, ROFR buy-out costs) and minus any depreciation taken. Your capital gain = sale price minus adjusted cost basis. The larger your basis, the smaller your taxable gain. See: cost basis guide.

Alien (Non-Resident Alien / Resident Alien)

IRS terminology for non-US persons. A "non-resident alien" (NRA) is a foreign person who does not meet either the green card test or the substantial presence test. NRAs file Form 1040-NR and are subject to FIRPTA. A "resident alien" who meets the substantial presence test is treated as a US person for tax purposes and is not subject to FIRPTA withholding.

Amount Realized

The total sale consideration received from a buyer. For DVC, this is the gross sale price. FIRPTA withholding is computed on the amount realized (not the gain). The buyer/closing agent withholds 15% of this figure.

B

Basis

See Adjusted Cost Basis.

Buyer's Withholding Obligation

The legal requirement under FIRPTA for the buyer (or their agent) to withhold 15% of the purchase price from a foreign seller and remit it to the IRS within 20 days of closing. If the buyer fails to withhold, the buyer becomes personally liable to the IRS for the withheld amount) not a penalty, but actual liability.

C

Capital Gain

The profit from selling a capital asset. For DVC, it is the sale price minus your adjusted cost basis. Capital gains from DVC held more than one year are long-term gains, taxed at 15% for non-residents. Short-term gains (held one year or less) are taxed at ordinary rates (up to 30% for non-residents).

Certified Acceptance Agent (CAA)

A person or entity authorized by the IRS to verify identity documents (such as passports) for ITIN applications. When you use a CAA, your original passport does not need to be mailed to the IRS (the CAA certifies its authenticity and submits the Certificate of Accuracy with your W-7. See: Certified Acceptance Agents.

Closing Agent

The title company, escrow company, attorney, or other settlement agent responsible for handling the DVC closing. For FIRPTA purposes, the closing agent is typically the withholding agent) the entity that withholds 15% from the seller's proceeds and files Form 8288 with the IRS.

Cost Basis

See Adjusted Cost Basis.

D

Deed

The legal instrument that conveys ownership of the DVC interest from seller to buyer. DVC contracts are deeded real property interests in the resort property. The deed is recorded with the county where the resort is located (e.g., Orange County, Florida for Walt Disney World DVC resorts).

Depreciation

An annual tax deduction for the wear of income-producing property. Personal-use DVC cannot be depreciated. If you rented DVC points as a business, depreciation may have been allowable (and the accumulated depreciation reduces your cost basis, increasing your gain at sale. See: depreciation and DVC.

Depreciation Recapture

Tax on the portion of a property sale gain attributable to prior depreciation deductions. Recapture is taxed at ordinary income rates (up to 25%) rather than the long-term capital gains rate. Only relevant if you previously claimed depreciation on DVC.

Disposition

The legal transfer of a US real property interest, including sale, exchange, gift, or other conveyance. FIRPTA applies to dispositions by foreign persons. Selling DVC to another person is a disposition.

DVC (Disney Vacation Club)

Disney's deeded real estate timeshare program. Members own a fractional interest in a specific resort (or in the Disney Vacation Club Trust for direct purchases) expressed as annual points. DVC is a US Real Property Interest (USRPI) subject to FIRPTA when sold by a non-US person.

F

FIRPTA (Foreign Investment in Real Property Tax Act)

US law enacted in 1980 requiring buyers of US real property from foreign sellers to withhold tax at closing and remit it to the IRS. The withholding is a prepayment against the seller's US capital gains tax liability. See: what is FIRPTA.

FIRPTA Withholding

The amount withheld at closing under FIRPTA: 15% of the gross sale price (standard rate). The withheld amount is remitted to the IRS by the withholding agent within 20 days of closing. The seller later files Form 1040-NR to claim a refund of the excess withholding over actual tax.

Foreign Person

Under FIRPTA, a foreign person is any individual who is not a US citizen and does not qualify as a US resident alien (does not meet the green card test or substantial presence test). Also includes foreign corporations, partnerships, trusts, and estates. If you are a UK, Australian, Canadian, Mexican, or other non-US citizen living outside the US and you own DVC, you are a foreign person subject to FIRPTA.

Form 1040-NR

The US non-resident alien income tax return. Filed by foreign persons with US-source income. DVC sellers use Form 1040-NR to report the capital gain from the DVC sale, attach Schedule D and Form 8949, and claim the FIRPTA withholding (Form 8288-A) as a tax credit. See: Form 1040-NR guide.

Form 8288

US Withholding Tax Return for Dispositions by Foreign Persons of US Real Property Interests. Filed by the withholding agent (closing agent) to remit FIRPTA withholding to the IRS. As the seller, you do not file Form 8288) the closing agent files it. See: Form 8288 guide.

Form 8288-A

Statement of Withholding on Dispositions by Foreign Persons of US Real Property Interests. This is your withholding receipt (the IRS stamps and returns Copy B to the seller as proof that withholding was received. Attach Form 8288-A Copy B to Form 1040-NR to claim the withholding credit. See: Form 8288-A guide.

Form 8288-B

Application for Withholding Certificate for Dispositions by Foreign Persons of US Real Property Interests. Filed before or at closing to request a reduction or elimination of FIRPTA withholding based on the actual expected tax. Useful when your actual tax will be significantly less than the standard 15% withholding. See: Form 8288-B guide.

Form 8949

Sales and Other Dispositions of Capital Assets. Lists each DVC sale with date acquired, date sold, proceeds, cost basis, and gain or loss. Flows into Schedule D. Required on every Form 1040-NR that includes a capital asset sale. See: Schedule D guide.

Form W-7

Application for IRS Individual Taxpayer Identification Number. Used by non-US persons to obtain an ITIN. DVC sellers without an ITIN must file Form W-7 (either attached to Form 1040-NR or through a CAA) before the IRS will process their refund. See: ITIN application guide.

G

Gain

See Capital Gain.

Green Card Test

One of two tests for US resident alien status. If you hold a US Permanent Resident Card (green card), you are treated as a resident alien for US tax purposes) not a foreign person (and FIRPTA does not apply to your DVC sale.

H

HARPTA

Hawaii Real Property Tax Act. Hawaii's state-level equivalent of FIRPTA. Applies to sales of Hawaii real property (including DVC Aulani) by non-Hawaii residents. The withholding rate is 7.25% of the gross sale price. Separate from federal FIRPTA. See: HARPTA guide for Aulani.

I

ITIN (Individual Taxpayer Identification Number)

A US tax identification number issued by the IRS to non-US persons who do not qualify for a Social Security Number but have a US tax obligation. Required to file Form 1040-NR and receive a FIRPTA refund. Format: 9XX-XX-XXXX (always starts with 9). See: ITIN application guide.

ITIN Renewal

ITINs that have not been used on a tax return for three consecutive years expire. Some middle digits also expire on a rolling schedule. If your ITIN has expired, renew by filing a new Form W-7 before submitting your 1040-NR. See: ITIN renewal guide.

L

Long-Term Capital Gain

A gain from selling an asset held more than one year. For non-resident alien individuals, long-term capital gains on US real property interests are taxed at 15%. Because DVC contracts are typically held for many years, most DVC sellers qualify for this preferential rate.

R

Realized Amount

See Amount Realized.

ROFR (Right of First Refusal)

Disney's contractual right to purchase a resale DVC contract at the agreed buyer price before the sale is completed. ROFR is not a FIRPTA issue) it is a DVC-specific resale mechanic. If Disney exercises ROFR, the sale proceeds and FIRPTA withholding calculations remain the same, with Disney substituting for the original buyer.

S

Schedule D

Capital Gains and Losses. The form attached to Form 1040-NR that summarizes all capital gains and losses from Form 8949. The net gain from Schedule D flows to Form 1040-NR as taxable income. See: Schedule D guide.

Substantial Presence Test

One of two tests for US resident alien status. If you are physically present in the US for 183 days or more using a weighted three-year formula (all days this year + 1/3 of days last year + 1/6 of days two years ago), you may be treated as a resident alien. Resident aliens are not subject to FIRPTA.

U

US Real Property Interest (USRPI)

The category of assets subject to FIRPTA. Includes an interest in real property located in the United States or the US Virgin Islands, including timeshares such as DVC. When a foreign person sells a USRPI, FIRPTA withholding applies.

W

Withholding Agent

The person or entity responsible for withholding FIRPTA tax at closing and remitting it to the IRS. For DVC resales, this is typically the title company or escrow agent. If no withholding agent is involved in the transaction, the buyer is the withholding agent by default.

Withholding Certificate

A certificate issued by the IRS (in response to Form 8288-B) that modifies or eliminates the standard FIRPTA withholding requirement. If the IRS issues a withholding certificate showing your actual expected tax is $800, only $800 needs to be withheld at closing rather than the standard 15% of the gross sale price.