Year-End DVC Sales: FIRPTA Planning for December Closings

If your DVC sale is closing in November or December, you have a timing advantage that most sellers don't think about. A late-year closing means you can file your 1040-NR in just a couple of months (January or February of the following year), rather than waiting 6-10 months like sellers who close early in the year.

The Timing Advantage

You can't file your 1040-NR until the tax year ends (December 31). If your sale closes in March, you wait almost a year before filing. If it closes in December, you can file in January, just weeks later.

Earlier filing means earlier refund. Since the IRS takes 4-6 months to process non-resident returns, filing in January could get you a refund by May or June. That's a much shorter wait than a March seller who files the following February and gets their refund in July or August of the year after that.

The Paperwork Reality

There's a catch. Your closing agent has 20 days to file Form 8288 and the withholding payment. If your sale closes on December 15, the 8288 filing happens in early January. The IRS then processes it and mails you the stamped Form 8288-A, which takes 2-3 months.

You might not have your stamped 8288-A when you're ready to file your 1040-NR in January. That's okay. You can file using the unstamped copy from the closing agent and a copy of your closing statement showing the withholding amount. Include a note that the 8288-A is pending.

ITIN Timing

If you need an ITIN, December closings create a tight timeline. You need the ITIN to file your 1040-NR, and the ITIN application takes 7-11 weeks. If you submit your W-7 with your 1040-NR in January, your ITIN might not be processed until March or April. Your tax return sits in a holding pattern until the ITIN is assigned.

If you know you're selling late in the year, consider applying for an ITIN beforehand. This doesn't always work (the IRS prefers to see the tax return attached), but some sellers have success with advance applications.

Year-End Tax Planning

A December closing also creates a decision point: do you want the sale in this year's tax return or next year's? If you have other US real property sales, capital losses, or treaty benefit considerations, the timing of the closing date matters.

If you're selling two contracts, one at a gain and one at a loss, closing both in December lets you offset them on the same return. Talk to your broker about whether your closing date can be adjusted by a few days or weeks to land in the most tax-favorable year.

December Closing Checklist

• Confirm your closing date and which tax year it falls into
• Ask the closing agent for copies of Form 8288 and 8288-A as soon as they're filed
• Prepare your 1040-NR filing materials in December so you can file in early January
• Apply for ITIN early if you don't have one
• Consider filing Form 8288-B (though with a December closing, the 90-day processing time means you probably won't get a certificate before closing)
• Report the sale on your home country tax return for the same year

December DVC sales have a silver lining: faster refund timeline. Plan ahead, file early, and get your money back sooner.