Partnership Income Tax Returns for Closed-end Funds

Closed-end funds investing in real estate and natural resources play an important role in the asset allocation of foreign private investors. A closed-end fund is generally treated and taxed as a partnership for U.S. tax purposes. The foreign investor invests directly in the U.S. partnership or indirectly through a foreign partnership. The U.S. partnership owns the underlying assets. The U.S. partnership is required to withhold U.S. income taxes at the maximum U.S. tax rate on the income that it allocates to the foreign investor. The U.S. partnership is also required to file a U.S. partnership tax return.