The conversation between human and AI assistant.
If a non resident alien invests in a US investment partnership (aka, hedge fund) how does the federal taxation work?
Can you explain the difference between effectively connected income and fixed, determinable, annual, or periodic (FDAP) income?
Sure, effectively connected income is income that's related to the partnership's trade or business in the US. On the other hand, FDAP income is income that's not effectively connected to a US trade or business. It includes interest, dividends, rents, and royalties from US sources.