Partnerships undergoing sales or exchanges of certain partnership interests are mandated to file IRS Form 8308, Report of a Sale or Exchange of Certain Partnership Interests. This form is essential for reporting transactions where a partner sells part or all of their partnership interest, and the consideration received is attributable to unrealized receivables or inventory items, commonly referred to as Section 751(a) exchanges. Let’s delve into the intricacies of the new and improved IRS Form 8308, including recent expansions and updates.


Understanding Form 8308 Requirements

Partnerships typically file IRS Form 8308 as an attachment to Form 1065, U.S. Return of Partnership Income, for the tax year that encompasses the last day of the calendar year in which the Section 751(a) exchange occurred. The form is due at the time of filing Form 1065, including extensions. Additionally, copies of Form 8308 must be furnished to both the transferor and transferee partners by January 31st of the year following the exchange or, if later, within 30 days after the partnership becomes aware of the transaction.


Enhancements to IRS Form 8308


Commencing with the 2023 tax year, significant enhancements have been made to Form 8308. These include expansions to Parts I and II, along with the addition of Parts III and IV. Parts I and II solicit information concerning the record-holder, beneficial owner details of both transferor and transferee partners, and now include a checkbox to indicate if the transferor is a foreign partner. Part III is dedicated to specifying the type of partnership interest transferred, while Part IV requires reporting on the partnership’s and transferring partner’s share of Section 751 “hot assets” gain or loss, collectibles gain, and unrecaptured Section 1250 gain.


IRS Notice 2024-19: Relief Measures

Recent industry concerns regarding meeting the January 31st deadline for furnishing the newly required information prompted the IRS to issue Notice 2024-19. This notice provides limited relief, stating that penalties will not be imposed solely for failure to furnish Part IV of Form 8308 to the transferor and transferee by the due date. However, partnerships must ensure timely and accurate furnishing of Parts I, II, and III by January 31st and furnish complete copies of Form 8308, including Part IV, by the due date of the partnership’s Form 1065, inclusive of extensions.


Author Introduction: Pritish Kumar Halder

Pritish Kumar Halder is a seasoned tax consultant specializing in partnership taxation and compliance. With a keen understanding of complex regulatory frameworks, Pritish navigates clients through intricate tax reporting requirements, ensuring adherence to regulatory mandates and optimizing tax strategies. Through insightful analysis and strategic guidance, Pritish empowers partnerships to navigate evolving tax landscapes with confidence and proficiency.