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A single member LLC owned by a non-resident is a partner in a domenstic Multimember LLC. does the multiember need to withhold per IRC section 1446 to the non-resident?

Submitted: 8 months ago.Category: Tax
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Answered in 39 minutes by:
9/16/2017
Tax Professional: Barbara, Enrolled Agent replied 8 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 5,996
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

No. There is no withholding requirement.

New IRS regulations “treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for the limited purposes of the reporting, record maintenance and associated compliance requirements that apply to 25 percent foreign-owned domestic corporations under section 6038A of the Internal Revenue Code.

The following links contain additional, excellent information you will find helpful:

https://www.usa-corporate.com/blog/new-rules-llcs-for-foreigners/

https://www.thetaxadviser.com/issues/2017/apr/foreign-owned-domestic-disregarded-entities-new-reporting-requirements.html

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 8 months ago
New IRS regulation is for reporting purposes only. There is no change on income tax purposes. Since thre is no change on income tax purposes, the multimember LLC must file a K-1 to the members. But filing a K-1 to a single member LLC is incorrect. It should be to the owner's name. Which brings up the question, since the solemember is a foreigner, is there withholding per IRC section 1446? or, the K-1 is filed to the Single member LLC and the foreigner files 1040NR with sch E and ignore Sch C.
Thank you,
Tax Professional: Barbara, Enrolled Agent replied 8 months ago

In situations where a Single Member LLC is a member of a multiple member LLC, the IRS instructs that the multiple member LLC issue the K-1 to the OWNER of the Single Member LLC (not to the Single member LLC itself).

The owner then files Form 1040NR with Schedule E.

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Customer reply replied 8 months ago
But then, since the K-1 is to a Foreign member, Does the multimember need to withhold?
Thank you,
Tax Professional: Barbara, Enrolled Agent replied 8 months ago

Yes. It is basically a "payment on account" until the nonresident member files Form 1040NR.

See the following: http://dbclawyer.com/u-s-partnerships-with-foreign-partners/

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