United States

Grecian Magnesite effectively disconnects on ECI treatment

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In this article, reprinted from Tax Notes, the authors analyze the Tax Court’s recent decision in Grecian Magnesite Mining, Industrial and Shipping Co. SA v. Commissioner, which rejects the IRS’s long-standing position set forth in Rev. Rul. 91-32.  Rather than adopting that ruling’s “look-through” approach in determining the taxation of a foreign partner on its disposition of a U.S. partnership interest, the Tax Court applied an “entity approach,” ruling that the sale of the partnership interest should be treated as the sale of a capital asset and that the gain was not effectively connected with a U.S. trade or business.   This ruling will be of great interest to private equity funds and other flow-through entities with foreign partners.

Reprinted with permission from Tax Notes. 


 

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