The IRS announced in Notice 2025-02 (the Notice) that it will not impose IRC Section 6722 penalties on partnerships that furnish payee statements without Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, Part IV, which requires partnerships in some situations to list unrealized receivables or inventory items involved in a sale or exchange under IRC Section 751(a) (IRC Section 751 property).

Background

IRC Section 6050K and its regulations require partnerships with IRC Section 751 property to provide information to each transferor and transferee involved in a sale or exchange of a partnership interest involving IRC Section 751 property (IRC Section 751(a) exchange).

Partnerships must report each IRC Section 751(a) exchange on Form 8308, which must be filed as an attachment to Form 1065, U.S. Return of Partnership Income. Under Treas. Reg. Section 1.6050K-1(c)(1), each partnership that files a Form 8308 must furnish it or a statement with the same information by the later of (1) January 31 of the year following the calendar year in which the IRC Section 751(a) exchange occurred or (2) 30 days after the partnership received notice of the exchange under IRC Section 6050K and Treas. Reg Section 1.6050K-1. Partnerships that do not furnish timely, correct payee statements are liable for penalties under IRC Section 6722.

The IRS issued a revised Form 8308 in October 2023 requiring additional information on Part IV about IRC Section 751 property, including the partnership's and the transferor partner's share of IRC Section 751 gain and loss, collectibles gain under IRC Section 1(h)(5) and unrecaptured IRC Section 1250 gain under IRC Section 1(h)(6).

The IRS said in the Notice that practitioners have raised concerns that many partnerships will not have the 2024-year information necessary for Part IV of Form 8308 by January 31, 2025.

IRS relief

For IRC Section 751(a) exchanges during calendar year 2024, the IRS will not impose penalties under IRC Section 6722 solely for failure to furnish Form 8308 with a completed Part IV by January 31, 2025, if the partnership complies with two requirements:

• Timely and correctly furnishes 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, 2025, or 30 days after the partnership is notified of the IRC Section 751(a) exchange
• Furnishes to the transferor and transferee a copy of the complete Form 8308, including Part IV, or a statement that includes the required information, 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 IRC Section 751(a) exchange

The IRS added that the Notice does not provide relief from filing Form 8308 as an attachment to a partnership's Form 1065 or the IRC Section 6721 penalty for failure to file correct information returns.

Implications

The relief from penalties granted by this Notice will provide partnerships with additional time in which to compile and prepare Part IV of Form 8308. Partnerships will still need to file a completed Form 8308 for the IRC Section 751(a) exchange transactions, albeit not by the January 31 deadline, and accordingly should obtain the necessary information as soon as practicable.