United States

Private Equity Fund Implications of Grecian Magnesite Mining Co. Tax Court Opinion

Aug 07, 2017
From the KPMG TaxWatch

The U.S. Tax Court in Grecian Magnesite Mining Co. v. Commissioner rejected the IRS position set forth in Rev. Rul. 91-32 that a foreign partner is generally subject to U.S. tax gain from the sale of an interest in a partnership to the extant the gain is attributable U.S. trade or business assets of the partnership.

In Implications of the Tax Court's Opinion in Grecian Megnesite Mining Co. v. Commissioner for Private Equity Funds, KPMG's Eric Corwin explains that private equity fund sponsors accustomed to using U.S. blocker corporations to hold investments in U.S. operating companies classified as partnerships for federal tax purposes need to consider whether foreign blocker corporations have become relatively more attractive for this purpose in light of the court’s opinion. Private equity fund sponsors also need to consider whether there are opportunities for their foreign blocker corporations, or fund partners, to file refund claims with respect to tax paid or withheld in connection with prior sales of interests in portfolio companies that were treated as partnerships for U.S. tax purposes and that were engaged in U.S. trades or businesses.

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Read July 17 TaxNewsFlash with KPMG's initial analysis of Tax Court's opinion

Contact Erik Corwin
Erik Corwin

Principal, Corporate Group, Washington National Tax, KPMG LLP
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