In YA Global Investments, LP v. Commissioner, the U.S. Tax Court (Court) ruled that a non‑U.S. fund was engaged in a U.S. trade or business based on the activities of its investment manager and was subject to mark-to-market accounting rules, resulting in income earned by the non‑U.S. fund being deemed effectively connected income. The holding raises a number of issues and concerns for tax counsel and private fund managers about how to structure funds to avoid adverse tax consequences for non‑U.S. investors. To delve into the issue, Strafford CLE Webinars recently hosted a program examining the tax implications of private fund activities for non‑U.S. investors following the Court’s decision in YA Global. The panel featured Mayer Brown partner Mark H. Leeds, KPMG partner Jay Freedman and BlackRock’s global co‑head of alternatives tax, Sarah Ryan. This first article in a two-part series summarizes the tax rules implicated by YA Global, along with pertinent facts from the case that contributed to the Court’s ruling. The second article will analyze the seven primary issues raised in YA Global, how the Court ruled on each and potential alternative considerations that private fund managers should weigh. For more on tax withholding on foreign partners, see our two-part series: “Partnership-Level Duties and Consequences As the Requirement Has Evolved Over Time” (Mar. 2, 2021); and “Overview of Various Exemption Certifications and Tips for Reducing Withholdings” (Mar. 9, 2021).