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Legal Update

Redemption of Interest in US Partnership Not Taxable to Foreign Investor; Tax Court Refuses to Follow Revenue Ruling 91-32

28 July 2017
Mayer Brown Legal Update
Structuring in-bound partnership investments for non-US persons has been fraught with US tax risk because of the IRS position in Revenue Ruling 91-32. Specifically, in Revenue Ruling 91-32, the Internal Revenue Service took the position that when a non-US person sells an interest in a partnership, if the partnership is engaged in the conduct of a trade or business in the United States, the gain is subject to US tax. The US Tax Court, in Grecian Magnesite Mining v. Commissioner, refused to follow Revenue Ruling 91-32 and held that the sale of the partnership interest was not subject to US tax. The attached Legal Update discusses this important development in cross-border tax planning.


  • James R. Barry
    T +1 312 701 7169
  • Mark H. Leeds
    T +1 212 506 2499
  • Jason S. Bazar
    T +1 212 506 2323
  • Jeffrey M. Bruns
    T +1 312 701 8793
  • Leah Robinson
    T +1 212 506 2799
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