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Gain on Sales of U.S. Partnership Interests by Foreign Partners: 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 video webinar with Q&A

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Conducted on Wednesday, July 20, 2022

Recorded event now available

or call 1-800-926-7926

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 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 filing requirements under current tax law and implement effective planning techniques to limit tax liability upon foreign persons' disposition of U.S. partnership interests.

The sale, exchange, or other disposition of a partnership interest held by foreign persons may trigger the withholding and filing requirements under Sections 864(c)(8) and 1446(f). Under current tax law, dispositions of partnership interests by foreign owners include all partnership assets that are effectively connected to a U.S. trade or business. 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 required under Section 1446(f), the issuer partnership is liable for the unpaid withholding tax.

Listen as our experienced panel critically examines the structuring and reporting impacts of the new tax law provisions on non-U.S. persons holding U.S. partnership interests.



  1. Determining ECI under current tax law
  2. Section 1446(f); calculating the amount realized on the disposition of a partnership interest
  3. Remedial actions and tactics for non-U.S. partners paying tax on partnership sale gain
  4. 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 selling a U.S. partnership based on an ECI determination?
  • What is the impact of the tax rules 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 under current tax law?


Coyle, Ryan
Ryan J. Coyle

McDermott Will & Emery

Mr. Coyle focuses his practice on international tax matters, with an emphasis on providing tax-efficient restructuring...  |  Read More

Weigand, Gregory
Gregory M. Weigand

McDermott Will & Emery

Mr. Weigand focuses his practice on complex domestic and international tax matters for multinational companies, closely...  |  Read More

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