Tax Notes Quotes David Rosenbloom on Implementing Taxation of Foreign Sales of Partnership Interests

New York is [ ] a center for creative tax planning. The Tax Cuts and Jobs Act (P.L. 115-97) reversed Grecian Magnesite v. Commissioner, 149 T.C. 63 (2017), in a new statute for taxation of effectively connected gain on a foreign partner’s disposition of a partnership interest (section 864(c)(8)). Withholding is required on the entire gross proceeds of the sale (section 1446(f)). Last year, the IRS issued interim guidance for withholding on dispositions of interests in non-traded partnerships (Notice 2018-29, 2018-16 IRB 495).

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“For me the question is pretty simple: Is the gain from sale of a partnership interest attributable to the PE that the partner has by virtue of its interest in the partnership? I would have thought the answer, as a practical matter, is clearly yes. Only a tax adviser would find any daylight there,” said H. David Rosenbloom of Caplin & Drysdale. “Needless to add, I think the Grecian Magnesite decision is ridiculous.”

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Excerpt taken from the article, “News Analysis: Implementing Taxation of Foreign Sales of Partnership Interests” by Lee A. Sheppard for Tax Notes.