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BLOGS. February 13, 2024

Considerations for Direct Lending and the YA Global Case

Funds run the risk of being considered engaged in a trade or business in the U.S. if they engage in lending activities and create “effectively connected income” for their non-US investors. IRC Sec 864 has a safe harbor provision for “trading in securities.” Investing in stock, securities and commodities does not result in a trade or business. However, it is generally accepted that a “lending, financing or similar” business does not fit within the trading safe harbor of 864(b)(2)A(ii).  

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