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.
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