Recent Developments: Sourcing Rules for Personal Property and Dispositions of Partnership Interests

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


Conducted on Tuesday, March 2, 2021

Recorded event now available

or call 1-800-926-7926
Course Materials

This course will clarify the recently released final regulations for the sale of personal property and inventory and explain the application of Section 864(c)(8), added by the 2017 Tax Act, to the sale of partnership interests. Sourcing determinations made under these guidelines are far-reaching and affect taxes paid in the U.S., abroad, and the calculations of foreign tax credits as well.

Description

U.S. taxpayers are often required to determine the "source" of their gross income items--a threshold determination that can have a dramatic impact on U.S. tax outcomes. The historic determination is evolving to embrace a geographically mobile economy and one not tied to a physical location.

The 2017 Tax Act changed the source-of-income rules for the sale of personal property and inventory. Final regulations released in September 2020 explain the application of these rules. The rules vary for inventory purchased versus produced and rely on existing Treasury Regulation Section 1.954-3(a)(4) for its definition of produced property. These regulations are particularly crucial for businesses manufacturing property overseas for sale in the U.S. and foreign entities with U.S. locations.

For dispositions of partnership interests, IRC 864(c)(8) stipulates that the gain or (loss) from a disposition is treated as effectively connected income (ECI) to the extent it would have been ECI had the assets been sold at fair market value. The regulations provide a three-step process to calculate this amount.

Sourcing income under these new regulations is extremely complex. The interplay of the new regulations with existing sourcing rules and U.S. income tax treaties makes them more so.

Listen as our panel of international tax experts provides practical advice and illustrative examples explaining the sourcing-of-income rules. Particularly, they will discuss applying complex and overlapping guidance to sales of personal property, inventory, and the disposition of partnership interests.

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Outline

  1. Sourcing income: overview
  2. Sourcing income from sales of inventory
  3. Sourcing gains and losses from dispositions of interests in partnerships
  4. Foreign tax credit regulations
  5. Illustrations

Benefits

The panel will review these and other critical issues:

  • Applying the treaty coordination rules included in the final partnership disposition regulations
  • The impact of the final IRC 1.864(c)(8)-1 regulations on the calculation of foreign tax credits
  • Determining whether an activity is a production activity
  • How intangible assets are properly sourced
  • How are the new sales of property regulations intended to interact with existing profits provisions in treaties?
  • Using the three-step process to determine applicable ECI on partnership interest dispositions

Faculty

Fuller, Pamela
Pamela A. Fuller, Esq.

Counsel (Tax, M&A, International)
Zahn Law Group

Ms. Fuller’s practice has a triple focus: tax planning, tax controversies, and tax compliance. She advises a wide...  |  Read More

Ronald M. Gootzeit
Ronald M. Gootzeit
Attorney
IRS Office of Associate Chief Counsel (International)

Mr. Gootzeit is an Attorney in Branch 4 of the Office Associate Chief Counsel (International) at the Internal Revenue...  |  Read More

Rowland, Chadwick
Chadwick P. Rowland

Attorney
IRS, Office of Associate Chief Counsel (International)

Mr. Rowland is an Attorney in the Office of Associate Chief Counsel (International), Branch 4. He specializes in the...  |  Read More

Stahl, Raymond
Raymond J. Stahl

Principal
Ernst & Young

Prior to joining EY, Mr. Stahl was a special counsel in the Office of the Associate Chief Counsel (International) at...  |  Read More

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