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New IRC 864(c)(8) Withholding Rules on Partnership Sales: Calculations and Affidavit of Exemption

Navigating New Partnership Effectively-Connected Income Treatment and Section 1446(f) Remittances

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, July 31, 2018

Recorded event now available

or call 1-800-926-7926

This course will provide tax advisers and compliance professionals with a critical look at the new withholding rules for sales of interests in U.S. or foreign partnerships earning income effectively connected with a U.S. trade or business. The panel will detail the specific challenges of the new rule, including determination of whether a transferred interest has effectively connected income (ECI), documenting exemptions to withholding requirements, and calculating and remitting withholding payments under new Section 1446(f).


One of the more far-reaching provisions of the tax reform law of 2017 is Section 864(c)(8). This section imposes new requirements on foreign persons buying or selling any interest in a U.S. or non-U.S. partnership (or other entity that is treated as a partnership for U.S. federal income tax purposes) engaged in a U.S. trade or business. Partnership advisers must be keenly aware of the impact on both partnerships and their non-U.S. partners to avoid potentially costly tax consequences from the new rules.

Notably, Section 1446(f) requires a purchaser of an interest in a partnership with ECI in a U.S. trade or business to withhold 10% of the amount realized on the disposition and remit the amount to the IRS. If the purchasing partner fails to make the required withholding and payment, the partnership will be required to withhold the missing withholding amounts, plus interest and potential penalties.

The statute provides an exception to the withholding requirement under Section 1446(f) if the purchaser obtains an affidavit from the seller of the interest that no portion of the gain is attributable to a U.S. trade or business. This presents several significant challenges for partnerships and their advisers, particularly in identifying whether any partnership activity has ECI. The law contains no de minimis exception to the ECI determination, so even a miniscule amount of income attributable to a U.S. trade or business could translate to a 10% withholding on the entire purchase price.

Listen as our experienced panel provides a thorough and practical guide to the new partnership withholding on sale requirements of Section 864(c)(8).



  1. Prior treatment of sale of partnership interest
  2. New provisions of Section 864(c)(8)
    1. Gain on sale of interest in partnership with ECI to a U.S. trade or business
    2. Withholding requirements under Section 1446(f)
    3. Affidavit exception
  3. Calculating withholding amounts
  4. Burden on partnership if purchasing partner does not withhold
  5. Planning implications for partnerships


The panel will discuss these and other important issues:

  • Identifying instances of de minimis connection to U.S. trade or business activity that would make a partnership disposition subject to withholding under Section 864(c)(8)
  • What goes into the calculation of the withholding amount under Sections 864(c)(8) and 1446(f)
  • Non-foreign person affidavit to avoid withholding requirement
  • Planning considerations to avoid or minimize the impact of 864(c)(8) on partnership transfers


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

Ryan, Rita
Rita M. Ryan

Vacovec Mayotte & Singer

Ms. Ryan practices in the areas of international and domestic taxation, estate planning, and tax controversy....  |  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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