Foreign Partner

Oct 17, 2018 4 Replies
S

Domestic partnership with foreign partners invests in rental real estate.



According to the IRS web page dealing with Effectively Connected Income, for a foreign individual, "Income from the rental of real property may be treated as ECI if the taxpayer elects to do so."



I assume that means the individual has the option to call the income ECI as opposed to FDAP income, which is taxed at 30% or 37%.



First, how wrong am I?



Second, if an individual can elect to have what would be considered rental FDAP income to be ECI, can a foreign partner in a domestic partnership do that too?



Thanks for any clarification you can give me.


Vote
Twitter Facebook LinkedIn
T

Simple explanation of eci for rental

If not eci, tax withholding is on gross, no expenses.

If eci, schedule e with expenses and uses 1040nr tax table.

Vote
Twitter Facebook LinkedIn
S

Yes, I understand that. I don't care about withholding.

The question is whether a foreign partner of a domestic partnership can elect that income from real estate rental be considered ECI. An individual can, but I can't find any authority on this point.

Vote
Twitter Facebook LinkedIn
A

Section 871(d) & 882(d) and their regulations allow for the election to any nonresident alien or foreign corporation

I don't see why not as long as the foreign partner is a nonresident alien or foreign corporation.

Vote
Twitter Facebook LinkedIn
S

Thanks, Alan. I appreciate the information.

Vote
Twitter Facebook LinkedIn

Join the Discussion

Have something to add? Share your thoughts — no account required.

Didn't find your answer?

Ask the community — no account required