Partners and Partnerships – International Tax Aspects (Portfolio 6680)

Tax Management Portfolio No. 6680, Partners and Partnerships – International Tax Aspects, examines the principal U.S. tax issues that arise when entities treated as partnerships for U.S. federal income tax purposes feature in international transactions. The key issues addressed include:

• When is an entity classified as a partnership for U.S. tax purposes?
• When is a partnership properly treated as an “aggregate” of its partners for purposes of an international rule? When is it treated as a separate entity?
• What is the distinction between domestic and foreign partnerships? Analysis of the significance of this distinction, primarily in the “outbound” context.
• How does the U.S. tax system treat inbound investment by a foreign person into the United States through a partnership? A foreign person carrying on business in the United States through a partnership? A foreign person investing in U.S. real property through a partnership? How is a foreign partner taxed on the sale of its partnership interest?
• What are the principal tax considerations for U.S. persons investing outside the United States through an entity treated as a partnership for U.S. tax purposes? Analysis of the interplay of the partnership rules and various rules affecting the taxation of foreign income of U.S. taxpayers, including subpart F and the GILTI regime as well as the PFIC rules.
• How do the new limitations on the deductibility of interest and other expenses added by the 2017 tax law apply to partnerships?
• How are cross-border contributions to and distributions by partnerships treated?
• How do the withholding rules apply to partnerships?
• How do bilateral tax treaties apply to partnerships and their partners?
• What are the obligations of partnerships to file informational returns with the IRS and to provide U.S. tax reporting to their U.S. or foreign partners?

Table of Contents

I. Introduction
II. Classification
III. Partnership as Aggregate or Entity
IV. Domestic and Foreign Partnerships
V. Inbound Investment in and Through Partnerships
VI. Base Stripping
VII. Outbound Investment in Partnership Form
VIII. Contributions of Property to Partnerships
IX. Distributions to Partners
X. Treaties
XI. Returns and Reports