On June 11, 2019, the D.C. Circuit Court of Appeals affirmed the Tax Court’s decision in Grecian Magnesite Mining, Industrial & Shipping Co., SA v. Comm’r, 149 T.C. No. 3 (2017), which held that gain recognized by a Greek corporation on the redemption of its U.S. partnership interests was not U.S. source income and thus, not subject to U.S. income tax. For a summary discussion of Grecian, see BDO’s July 2017 tax alert.
In the decision, the D.C. Circuit Court of Appeals affirmed that the gain recognized by the Greek corporation on the disposition of its partnership interests was not attributable to a U.S. office of the Greek corporation. For additional details, see the D.C. Circuit Court of Appeals’ decision.
While Section 864(c)(8), which was enacted as part of the 2017 tax reform known as the Tax Cuts and Jobs Act, essentially overrides the holding in Grecian, the D.C. Circuit Court of Appeals’ affirmation does provide reassurance for taxpayers that took a contrary position to Rev. Rul. 91-32 prior to the effective date of Section 864(c)(8).
Special thanks to the following BDO Alliance members for this article: Joe Calianno, Annie Lee, Robert Padersen, Natallia Shapel, Brandon Boyle, Monika Loving, Chip Morgan, Jerry Seade, Sean Dokko and Reese Frederickson