Resource Capital Fund – Australian Federal Court decision respects the flow-through character of a reverse hybrid

A Caymans LP with US-resident partners, which was treated for Australian purposes as a corporation and for US purposes as fiscally transparent, was assessed on a gain under the Australian equivalent of the taxable Canadian property rules.  In nullifying the assessment, Edmonds J quoted comments in the OECD commentary that the source jurisdiction (Australia) should apply the provisions of the applicable (Australia-US) Treaty "as if the partners had earned the income directly," so that assessments instead should have been made of the (numerous) US-resident partners.

Neal Armstrong.  Summary of Resource Capital Fund III LP v. Commissioner of Taxation, [2013] FCA 363 under Treaties – Art. 4.