Our partnership retained all profits for growth. Do we still owe section 1446 withholding for the foreign partners?
We have a U.S. trade or business through the partnership, but we reinvested everything and made no distributions this year. Because no cash went out to partners, one founder keeps arguing there cannot be a withholding obligation yet. The partnership has about $310,000 of effectively connected taxable income, and all partners are still waiting for actual cash.
What I need to know is whether section 1446 follows the income allocation itself or whether it only bites when money is actually distributed. If retained earnings still create a withholding duty, we need to treat this as a real liability now rather than a later clean-up item.
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