New Guidance on Withholding on Sales of Partnership Interests
View Client Update
Key takeaways:
-
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.