Hello and thank you for your question.
Unless an exception applies (see below), your buyer must deduct and
withhold a tax equal to 10% (or other amount) of the total amount
realized by you on the disposition (for example, 10% of the purchase
The "amount realized" is the sum of:
*The cash paid, or to be paid (principal only),
*The fair market value of other property transferred, or to be transferred, and
*The amount of any liability assumed by the transferee/buyer or to
which the property is subject immediately before and after the
IRS Publication 515
The exceptions to the above are listed at the bottom of the cited
page. In your case the only likely exception is the first one, i.e.
The transferee/buyer acquires the property for use as a home and the
amount realized (sales price) is not more than $300,000. The buyer or
a member of the buyer's family must have definite plans to reside at
the property for at least 50% of the number of days the property is
used by any person during each of the first two 12-month periods
following the date of transfer. When counting the number of days the
property is used, do not count the days the property will be vacant.
For this exception, the transferee/buyer must be an individual.
The buyer withholds the tax and pays it via Form 8288, U.S.
Withholding Tax Return for Dispositions by Foreign Persons of U.S.
Real Property Interests.
The enforcement of all this is that if the buyer fails to withhold the
tax from your purchase price, then the buyer becomes liable for the
tax. The papers for any US real estate sale include an opportunity
for the seller to certify that he is not a foreign person - - but in
your case you cannot so certify and hence your buyer will surely
withhold the 10%.
Although most treaties (including the US-NZ tax treaty) provide for
the exemption of gains from the sale or exchange of personal property,
gains from the sale or exchange of real property located in the United
States are taxable.
Thanks again for bringing us your question.
Search terms used:
"new zealand" treaty "withholding tax" "real property"
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