The IRS has proposed regs to delay and revise the reporting requirements for partnership interest exchanges, aiming to address compliance challenges and improve accuracy by aligning certain deadlines with a partnership’s annual tax return filing. (NPRM for Prop Reg REG-108822-25, 8/19/2025)
Partnerships’ Problems
IRC § 751(a) applies to sales or exchanges of partnership interests to the extent attributable to certain ordinary income assets. Under current regs, partnerships are required to file Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, for each Section 751(a) exchange and furnish a statement to both the transferor and transferee by the later of January 31 of the year following the transaction, or within 30 days of receiving notice of the exchange.
In 2020 final regs (T.D. 9926), the IRS revised Form 8308 to require additional reporting in Part IV, including the partnership’s gain or loss from a deemed sale under Section 751 and the transferor partner’s share of such amount.
As the IRS explained in a Notice of Proposed Rulemaking, the 2020 regs required a partnership to “furnish to a transferor partner the information necessary for the transferor to make the transferor partner’s required statement” pursuant to IRC § 6050K.
But many partnerships, particularly those with complex structures, reported to the IRS difficulty in meeting the accelerated January 31 deadline for providing the detailed information required in Part IV. The information necessary to complete this section is often not available until after year-end accounting and allocations are finalized, stakeholders said.
Partnerships often are faced with the risk of incomplete or inaccurate reporting and the increased administrative burden associated with the current timeline, according to the preamble to the regs.
Proposed Changes
The proposed regs would revise the timing requirements for furnishing information to transferors and transferees. Under the proposal, partnerships would be required to provide only Parts I, II, and III of Form 8308 — or a statement containing the same information — by the later of January 31 of the year following the exchange or 30 days after receiving notice of the transaction.
The more detailed information required in Part IV, which includes the partnership’s gain or loss and the transferor’s share, would be due with the partnership’s annual tax return for the relevant year.
This approach formalizes penalty relief previously provided by the IRS for exchanges occurring in 2023 and 2024, as outlined in Notice 2024-19 and Notice 2025-2. Under these notices, partnerships were permitted to delay furnishing Part IV until the extended deadline for filing Form 1065.
The proposed regs would apply to returns filed for tax years ending on or after the date the final regs are published, but partnerships may rely on the proposed rules for exchanges occurring on or after January 1, 2025, and before the final regs are published.
Form 8308 will be updated accordingly, the IRS said.
Public Hearing and Effective Date
The IRS and Treasury Department have requested public comments on the proposed regs and may schedule a public hearing if requested.
The proposed regs would apply to returns filed for tax years ending on or after the date the final regs are published, but partnerships may rely on the proposed rules for exchanges occurring on or after January 1, 2025, and before the final regs are published.
For more on Section 751 reporting requirements, see Checkpoint’s Federal Tax Coordinator FTC 2d ¶ S-2719.
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