Yesterday, the Tax Court released a decision, Grecian Magnesite Mining, Industrial & Shipping Co., SA, which may have significant implications for non-U.S. investors investing in U.S. businesses that operate in pass-through form. The case addressed the IRS’s position, articulated in a long-standing Revenue Ruling (Rev. Rul. 91-32), that a non-U.S. person’s capital gain on the sale of an interest in a partnership that is engaged in a U.S. trade or business (an “ECI Partnership”) is treated as effectively connected income (“ECI”) and, thus, is subject to U.S. federal income tax, to the extent attributable to the partnership’s U.S. trade or business. The Tax Court declined to follow Rev. Rul. 91-32, determining that the ruling could not be sustained on technical grounds. It held that a non-U.S. person’s capital gain on the sale of an interest in an ECI Partnership is not generally subject to U.S. federal income tax, except with respect to the portion of the gain, if any, attributable to the non-U.S. person’s share of the partnership’s U.S. real property interests. Although the implications of the decision will require further consideration (and will depend in part on whether the decision is appealed, and, if so, with what result), the decision would appear to present significant opportunities for future structuring and planning.