SECTION 12. TIERED

PARTNERSHIPS

The Treasury Department and the IRS intend to issue regulations clarifying that if a transferor transfers an interest in a partnership (upper-tier partnership) that owns an interest (directly or indirectly) in another partnership (lower-tier partnership), and the lower-tier partnership would have effectively connected gain upon the deemed transaction described in section 864(c)(8)(B)(i)(I) that would be taken into account by the transferor at the time of the transfer of the interest in the upper-tier partnership, a portion of the gain recognized by the transferor is characterized as effectively connected gain. These regulations will require lower-tier partnerships to furnish information to their partners in order for their indirect partners to be able to comply with sections 864(c)(8) and 1446(f). See section 6031(b); § 1.6031(b)–1T.