HOUSE OVERSIGHT 026782 there are no miscellaneous itemized deductions. Thus, assuming that the foreign feeder is a passive foreign investment company (PFIC), if the US high net worth shareholder is able to make the "qualified electing fund" election, the net income the investor would be required to report on his federal income tax return would be calculated after deducting all of the corporation's expenses, including management fees and investment expenses. 2. Non-US Partner's Gain on Sale of Partnership Interest may be Taxable as US Trade or Business Income; New Withholding Requirements apply to the Purchaser or the Fund The Tax Act specifically provides that gains realized by a non-US partner on a sale or exchange of a partnership interest will be treated as effectively connected US trade or business income ("Ed") to the extent that such partner would have been allocated [Cl had the partnership sold all of its assets. This provision is consistent with the IRS position in Revenue Ruling 91-32, and overrules a recent Tax Court case which had rejected the position taken in such IRS Ruling and instead held that since a partnership interest is treated as a capital asset, the foreign person's gain on its sale could escape US income taxation as a non-business capital gain. To the extent that a partnership has any [Cl-generating assets (including US real property interests), a seller of a partnership interest will have to provide a certificate that it is not a foreign person, and in the absence of such a certificate a purchaser (which could include the fund) will be required to withhold 10% of the gross purchase price. Further, the Tax Act provides that if the purchaser does not withhold, the partnership is required to withhold on distributions to such purchaser to cover the withholding. The Tax Act provides that the new withholding obligation for purchasers is effective for sales or other dispositions of partnership interests after December 31, 2017.