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Sale of Partnership Interest by Foreign Partners and Withholding Requirements: IRC Sections 864(c)(8) and 1446(f)

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Thursday, April 17, 2025

Recorded event now available

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This CLE/CPE webinar will provide an in-depth practical guide to sales of partnership interests and withholding requirements under IRC Sections 864 and 1446. The webinar will go beyond the basics of the effectively connected income (ECI) rules to offer guidance on the impact of related IRC rules, calculating required withholding amounts, required forms for reporting, and filing requirements for U.S. partnerships.

Description

For the unwary and unprepared, the tax treatment of LLCs and partnerships is fraught with confusion and problems. Ownership interests in these entities are comparable to corporate shares, but there are many important distinctions. Different rules determine tax basis, holding periods, and the character of gain or loss.

Evaluating the tax consequences of a sale or disposition of an LLC or partnership interest often requires considering whether the transferring interest is a profits interest or a capital interest, whether the interest is subject to vesting, and the character and holding period of the assets held by the partnership. To avoid unfavorable tax consequences, tax counsel must know how to evaluate the tax treatment of LLC and partnership interest transfers.

In addition, under Section 1446(f), any transferee is responsible for paying a 10 percent withholding tax on the amount realized from the sale, exchange, or other disposition of their interest if any portion of the gain would be treated as ECI to the trade or business within the U.S. under Section 864(c)(8) unless an exemption applies.

Listen as our panel examines the complex tax rules for transferring LLC and partnership interests and best practices for structuring transactions to obtain the desired tax outcomes.

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Outline

  1. Tax rules for sales or transfers of LLCs or partnership interests
  2. Special rules under IRC Section 864
  3. IRC Section 1446(f) withholding on sales by foreign partners
  4. Navigating basis adjustment rules

Benefits

The panel will review these and other key points:

  • Tax differences that result from choosing between the sale or redemption of a departing partner's interest
  • Whether a sale or redemption of other partners will create a taxable event for the remaining owners
  • How to determine the character of gain or loss upon a transfer
  • Holding period and basis rules for transfers of partial interests
  • Planning techniques to navigate self-employment taxes

Faculty

Modha, Neel
Neel Modha
Partner
Holthouse Carlin & Van Trigt

Mr. Modha's practice focuses on international tax, specializing in international tax consulting and compliance...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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