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New Guidance on Withholding on Sales of Partnership Interests
4 April 2018
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The IRS issued a Notice providing interim guidance on the withholding on the sale of nonpublicly traded partnership interests by foreign sellers. U.S. sellers will be able to avoid withholding by providing a W-9 or a certificate of nonforeign status (similar to those used for FIRPTA).
The IRS will also exempt withholding on a foreign seller (with valid certification) where (i) the seller’s share of ECI for last three years is below 25%, (ii) less than 25% of the partnership’s built-in gain is ECI, (iii) the seller does not realize any gain on the sale or (iv) the transfer is a nonrecognition transaction.
The Notice provides guidance on how to calculate a partner’s share of partnership liabilities in order to determine the amount realized subject to withholding.
The Notice suspends the partnership’s secondary liability to withhold if the buyer fails to do so.
Peter A. Furci
Adele M. Karig
Peter F.G. Schuur
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