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What cash buyers of high-end residential real estate need to know

The U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN) has substantial resources and goes to great lengths to investigate and identify individuals and businesses suspected of money laundering, tax fraud, and other white-collar crimes. As part of this effort, it recently renewed a Geographic Targeting Order (GTO) requiring title companies to divulge the names of individuals making large cash-only purchases of residential real estate.

What is the rationale for the Geographic Targeting Order?

In short, many purchasers of residential real estate are using LLCs and other corporate entities during these transactions. Under the GTO, title companies must provide the identities of the individuals using the LLCs. In previous GTOs, FinCEN has stated that nearly one-third, or 30 percent, of the transactions involve a buyer who has been named in a "suspicious activity report."

What types of purchases are on FinCEN's radar?

In Miami-Dade County, Palm Beach County, and Broward County, any buyer who pays $1,000,000 or more for residential real estate without a mortgage will be subject to the GTO. The GTO is also in effect in other parts of the country, including:

  • New York City: Cash purchases of $3,000,000 or more in Manhattan and $1,500,000 in Brooklyn, Queens, the Bronx, and Staten Island
  • Parts of California: Any cash purchase of $2,000,000 or more in Los Angeles County, San Diego County, San Francisco County, San Mateo County, or Santa Clara County
  • San Antonio: Any cash purchase of $500,000 or more

Anytime a buyer meets the criteria set forth above, the title company involved in the purchase is required to complete FinCEN Form 8300, providing the following information:

  • The buyer's identity (meaning the corporation or LLC purchasing the property)
  • The "Beneficial Owner's" identity (meaning the individual or individuals with equity in the property)
  • Information as to the closing date, purchase amount, and address of property

Given the scrutiny that the federal government is placing on these transactions, any purchaser or title company involved in a cash real estate transaction can benefit greatly from the assistance of a skilled tax attorney. With locations in Miami and Fort Lauderdale, Bucci Law Offices provides the highest caliber of representation in all aspects of tax law.

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