Grecian Magnesite Mining, Industrial, & Shipping Co. v. Commissioner, No. 17-1268 (D.C. Cir. 2019)Annotate this Case
Under the Internal Revenue Code's general rule, the geographic origin of the redemption income would be sourced according to the residence of the taxpayer. However, that general rule is subject to an exception known as the U.S. office rule, where income from any sale of personal property attributable to a nonresident's U.S. office is sourced in the United States (I.R.C. 865(e)(2)).
The DC Circuit affirmed the tax court's holding that the U.S. office rule is not satisfied in this case, reasoning that the proper focus in the circumstances is where the redemption itself occurred, as opposed to where the activities causing appreciation of the redeemed partnership interest occurred. Here, the tax court held that the redemption itself should not be attributed to Grecian's U.S. office, and the income should be treated as a foreign source.