The New (and Improved?) IRS Form 8308
Partnerships are required to file IRS Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, to report the sale or exchange by a partner of all or part of a partnership interest where any money or other property received in exchange for the interest is attributable to unrealized receivables or inventory items. In other words, where there has been a Section 751(a) exchange. Generally, the IRS Form 8308 is filed as an attachment to Form 1065, U.S. Return of Partnership Income, for the tax year of the partnership that includes the last day of the calendar year in which the Section 751(a) exchange took place. The IRS Form 8308 is due at the time of the filing of the Form 1065, including extensions; however, copies of IRS Form 8308 are required to be furnished to the transferor and transferee partners by January 31st of the year following the calendar year in which the Section 751(a) exchange occurred or, if later, 30 days after the partnership has notice of the exchange.
Beginning with the 2023 tax year (for transfers occurring on or after January 1, 2023), the IRS Form 8308 includes expansions to Parts I and II and additions of Parts III and IV. Parts I and II request information about the record-holder, as well as the beneficial owner of the transferor and transferee of the partnership interest. Part I also has a new checkbox to report if the transferor is a foreign partner. Part III was added for information on the type of partnership interest that was transferred. Part IV was added to report, when there is a Section 751(a) exchange, the partnership’s and the transferring partner’s share of Section 751 “hot assets” (defined as unrealized receivables and inventory items) gain or loss, collectibles gain under Section 1(h)(5), and unrecaptured Section 1250 gain under Section 1(h)(6).
Earlier this month, many in the industry and across the profession expressed concern over securing the newly required IRS Form 8308 information by the January 31st deadline. In response, the IRS provided, what we would consider, narrow relief with IRS Notice 2024-19, which stated that the IRS will not impose penalties solely for failure to furnish IRS Form 8308 with a completed Part IV to the transferor and transferee by the due date (January 31st in most cases), as long as the partnership:
- Timely and correctly furnishes, to the transferor and transferee, a copy of Parts I, II, and III of IRS Form 8308, or a statement that includes the same information, by the due date (generally January 31st); and
- Furnishes a copy of the complete IRS Form 8308, including Part IV, or a statement that includes the same information and any additional information required, to the transferor and transferee by the due date of the partnership’s Form 1065, including extensions.
A big thanks to Ryan Sonnenberg and Ben Darwin for their assistance with this blog post.
Source: IRS.gov
- Carey M. Heyman, CPA
- Managing Principal of Industry - Real Estate
- CliftonLarsonAllen LLP
- Century City (Los Angeles)
Carey is the Managing Principal of the Real Estate Industry at CLA. He is a trusted advisor with close to 20 years of experience providing accounting, assurance, tax, and consulting services to real estate industry owners, operators, family offices, developers and syndicators. Carey has a strong track record of helping clients build and retain capital by leveraging tax- and cost-saving strategies and employing tax credits and incentives. He also consults with high net worth individuals, large family groups, and owners of closely-held businesses on all aspects of tax planning, estate planning, and retirement planning.
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