Publication Date



Partnership and international taxation are two of the
most mind-numbing and inconsistent areas of the law.
Even more confusion occurs when the two intersect, such
as when a nonresident sells an interest in a U.S.
partnership. Many have wasted precious time and
abundant ink to come up with a solution. The IRS first
tried in Rev. Rul. 91-32, concluding that a nonresident
would be subject to tax if the partnership had assets
producing income generated from property in United
States. Although the guidance was appropriately
criticized for being statutorily inconsistent, this Note
argues that it nonetheless got to the right policy outcome.
In 2017, the Tax Court disagreed with the long-standing
IRS guidance; it declined to defer to the IRS’s
interpretation and held that a nonresident selling a U.S.
partnership interest would not be subject to tax. Fearing
abuse, Congress enacted a “look-through” approach in
§ 864(c)(8) that requires nonresidents to pay tax on the
gain from the sale of a U.S. partnership under certain
circumstances. Unfortunately, Congress created a
burdensome system for nonresidents trying to sell their
partnership interest.
This Note recounts the lingering saga of Rev. Rul. 91-
32 and illustrates why the intersection of partnership
taxation and international taxation remains convoluted,
unfair, and unwieldy. This Note also provides
recommendations to Congress that will lessen the

administrative headache and provide for a more
equitable way to tax nonresidents.