In a notice, the IRS has provided failure to furnish penalty relief to partnerships that are required to furnish Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, to transferors and transfees after a Code Sec. 751 exchange. (Notice 2024-19)
Generally, when there is a sale or exchange of a partnership interest in a partnership that has unrealized receivables or inventory items (Code Sec. 751 property) the partnership must furnish Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, to the transferor and transferee involved in that sale or exchange. The due date to furnish this form to the transferor and transferee is the later of (a) January 31 of the year following the calendar year of the dale or exchange or (b) 30 days after the partnership has received notice of the exchange.
In October 2023, the IRS released a revised version of Form 8308. The revised version of Form 8308 requires partnerships to report, among other items, the partnership’s and the transferor partners share of Code Sec. 751 gain and loss, collectibles gain, and unrecaptured section 1250 gain.
After the IRS released the revised form, some partnerships complained that they won’t have all the information required to complete the revised Part IV of the 2023 Form 8308 by January 31, 2024.
The IRS has responded to the complaints by providing failure to furnish penalty relief. The IRS will not impose failure to furnish Form 8308 with a completed Part IV by the January 31, 2024, due date if the partnership:
(1) timely and correctly furnished to the transferor and transferee a copy of Parts I, II, and III of Form 8308, or a statement that includes the same information, by the later of
- January 31, 2024, or
- 30 days after the partnership is notified of the exchange
(2) furnishes to both the transferor and transferee a copy of the complete Form 8308, including Part IV, or a statement that includes the same information and any additional information required by the later of:
- the due date of the partnership’s Form 1065 (including extensions), or
- 30 days after the partnership is notified of the exchange.
This relief applies only to furnishing Form 8308 to the transferor and transferee.
The notice does not provide relief with respect to filing Form 8308 as an attachment to a partnership’s Form 1065, and, therefore, does not provide relief from penalties for failure to file correct information returns.
For more information about the reporting requirements for 751 exchanges, see Checkpoint’s Federal Tax Coordinator ¶ S-2719.
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