Loan to Partnership from Non US Resident Alien Partner

Technical topics regarding tax preparation.
#1
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2318
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21-Apr-2014 10:39am
Location:
Los Angeles, California
Hello all, thank you in advance for any advice you may have.

I have a client - California based LLC, taxed as a partnership - who has one non US citizen, non resident alien partner. This partner made a loan to the partnership for which they have been making payments on including interest.

From my research, I believe that these interest payments would be considered US source income and would be subject to a withholding of 30% unless a tax treaty provision applies. Is that correct?

Furthermore, this partner should not be issued a 1099-INT but rather should receive a 1042-S?

Any advice on dealing with this situation, as we just learned of it and no withholdings have been done?
 

#2
sjrcpa  
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6563
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23-Apr-2014 5:27pm
Location:
Maryland
I think you are correct about reporting and withholding.

How long has this loan and interest payment(s) been in place?
I researched something similar recently and seem to recall if it happened in the prior year you could make up the missed withholding in the current year/first quarter. I can't remember all of the details, but it was something other than interest. I started with the 1042 instructions.
 


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