Grecian Magnesite effectively disconnects on ECI treatment
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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