What is FDAP?

Fixed, Determinable, Annual, or Periodical Income (FDAP)

It is important to test every FIRPTA disposition for FDAP income which is a form of Effectively Connected Income (ECI) and know how to report it to the IRS or suffer an audit well after the transaction has closed and you think you are home free.

FDAP is taxable income other than gains from sale of real or personal property and items excludable from gross income (tax exempts, scholarships, etc.) or stock and securities trades through a US broker.

Certain kinds of FDAP may be ECI for income purposes but not treated as ECI for withholding purposes!