Section 1446(f) Withholding

Section 13501 of the TCJA added section 1446(f) effective for transfers of partnership interests occurring on or after January 1, 2018. Section 1446(f) generally requires that a transferee of an interest in a partnership withhold 10% of the amount realized on the disposition if any portion of the gain would be treated under section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States. A transfer can occur when a partnership distribution results in gain under section 731. Under section 1446(f)(4), if the transferee fails to withhold any required amount, the partnership must deduct and withhold from distributions to the transferee the amount that the transferee failed to withhold (plus interest).