IRC Section 1402(b)

[adifusco]

Taxpayer lives in Canada.  Never steps foot in USA.   He will never apply for Social Security benefits. He is a silent, investor partner in a business in USA and received a K-1 with self-employment earnings.  How do I exclude those earnings for SE tax on his 1040-NR?

Internal Revenue Code §1402(b)

The term “self-employment income” means the net earnings from self-employment derived by an individual (other than a nonresident alien individual, except as provided by an agreement under section 233 of the Social Security Act) during any taxable year

[sjrcpa]

A. He needs to inform the partnership of his nonresident alien status. Which will probably trigger federal withholding.

B. For 2021, consider not subjecting to SE tax and attaching Form 8275. Note: I am not opining on the treatment of the SE income.

[adifusco]

The preparer of the partnership says the determination of whether he is subject to the self-employment tax is not made at the partnership level.  It's made at the individual level.  Federal and State withholding is being done by the partnership on behalf of the foreign partner.

[BobKamman]

And he is a citizen of what country?

I'm not so sure he didn't "step foot" in the USA when he went to work for (or became a partner in) a US company.  On the other hand, if he's a Canadian citizen, he might need the K-1 information for paying his Canadian taxes.  And if he has dual French and Irish citizenship, you have my sympathy.  

[adifusco]

Yes he is a Canadian citizen and will have to pay taxes for income earned from USA partnership to Canada Revenue Agency.