Disposition of U.S. Partnership Interest Will Not Result in Effectively Connected Income to Foreign Partner

What happens when a foreign individual or corporation sells an interest in a partnership that is engaged in a U.S. trade or business? The Internal Revenue Code does not directly answer this question – the answer lies at the intersection of several provisions and principles:

a. Foreign persons are subject to U.S. income taxes on their income effectively connected with a U.S. trade or business (ECI);

b. Foreign persons are usually not subject to tax on their capital gains (with exceptions for gains arising from. . .

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