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

Determining and Reporting Gain on Effectively-Connected U.S. Source Income

Recording of a 90-minute premium CLE/CPE webinar with Q&A

Conducted on Tuesday, June 4, 2019

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel and advisers with a critical look at sales of U.S. partnership interests by foreign partners under current tax law. The panel will discuss new and significant changes to international taxation relating to the disposition of U.S. partnership interests owned by foreign partners and taxpayers, recognized taxable gain, and available planning techniques.


Tax reform ushered in new and significant changes to international taxation, including a provision that supersedes the Tax Court's decision in Grecian Magnesite with amended Sections 864(c)(8) and 1446(f). Tax counsel and advisers must navigate the new filing requirements under current tax law and implement effective planning techniques to limit tax liability upon the disposition of U.S. partnership interests by foreign persons.

The sale, exchange or other disposition of a partnership interest held by foreign persons may trigger the new withholding and filing requirements under Sections 864(c)(8) and 1446(f). Under current tax law, dispositions of partnership interests by foreign owners now includes all partnership assets that are effectively connected to a U.S. trade or business. Amended Section 864(c)(8) of the Internal Revenue Code provides that effectively-connected income (ECI) includes the gain or loss on the sale of an interest in a partnership engaged in a U.S. trade or business.

Section 1446(f) provides that if any gain from a sale or exchange of an interest in a partnership is treated under Section 864(c)(8) as effectively connected with the conduct of a trade or business within the U.S., then the transferee must collect a 10 percent withholding tax from any seller of a partnership interest. If the buyer fails to withhold any amount as required under Section 1446(f), the issuer partnership is liable for the unpaid withholding tax.

Listen as our experienced panel provides a critical look at the structuring and reporting impacts of the new tax law provisions on non-U.S. persons holding U.S. partnership interests.



  1. Current tax law and reinstatement of Revenue Ruling 91-32
  2. Determining ECI under current tax law
  3. Section 1446(f) and Notice 2018-29; calculating the amount realized on the disposition of a partnership interest
  4. Remedial actions and tactics for non-U.S. partners paying tax on partnership sale gain
  5. Impact on existing partnership structures


The panel will review these and other critical issues:

  • What actions should counsel recommend to a non-U.S. partner from a sale of a U.S. partnership based on an ECI determination?
  • What is the potential impact of the new tax law on domestic and foreign blocker corporations investing in U.S. partnerships?
  • What are the methods of determining the source and calculating ECI of partnership sale gain amounts?
  • What should tax counsel consider for existing partnership structures in light of the new tax law?


O'Connor, Brian
Brian J. O'Connor


Mr. O'Connor co-chairs the firm's Tax and Wealth Planning Group and provides tax advice to partnerships...  |  Read More

Thomma, Friedemann
Friedemann Thomma


Mr. Thomma is Chair of the Firm's International Tax Practice. He focuses on corporate international tax planning...  |  Read More

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