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Sales of U.S. Partnership Interests by Foreign Partners: Sections 864(c)(8) and 1446(f)


Understand how foreign persons holding interests in entities classified as partnerships are subject to United States federal income tax.

In July 2017, the United States Tax Court issued the Grecian Magnesite decision, which held that contrary to prior IRS guidance foreign partners were largely not subject to tax on such a disposition, even if the partnership was engaged in a U.S. business. The congressional response was swift. In a manner of months and as part of the legislation commonly referred to as the Tax Cuts and Jobs Act, the Internal Revenue Code was amended to make clear that such dispositions did raise the potential for U.S. tax. The TCJA further enacted a new withholding regime applicable to transferees of such partnership interests as a collection mechanism, similar in structure to the FIRPTA regime. In the months that followed, the IRS issued notices and proposed regulations, and in October/November 2020, final regulations on the statutory amendments. This topic will offer tax professionals an understanding of the contours of the administrative guidance that has been promulgated in this area to date. The manner of calculating the gain treated as effectively connected with a U.S. business, and the amount realized base for withholding will also be discussed. This topic will explore the exceptions from withholding and required information to satisfy relevant safe harbors and will also identify areas of remaining uncertainty and guidance that the IRS has noted is still forthcoming.



Christopher Marotta

Christopher Marotta

Holland & Knight LLP

  • Partner at Holland & Knight LLP
  • Assists private equity and strategic clients with the tax aspects of acquisitions, divestitures, and restructurings of multinational enterprises
  • Advice given with respect to negotiation of public and private mergers and acquisitions, borrowings, and other credit facilities, as well as joint venture formations involving entities taxed as partnerships
  • Published in the Bloomberg Tax Management Memorandum, the Banking Law Journal, the Journal of Intellectual Property Law & Practice, and the American Bankruptcy Law Journal
  • Admitted to practice in New York and Florida
  • LL.M. degree, New York University School of Law; J.D. degree, University of Wisconsin Law School; B.A. degree, Bowdoin College
  • Can be contacted at or [email protected]

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