30 January 2025

Final regulations classify certain partnership related-party basis adjustment transactions as transactions of interest that require IRS information reporting

  • Treasury and the IRS issued final regulations (Final Regulations) identifying certain partnership related-party basis adjustment transactions, and substantially similar transactions, as "transactions of interest" under Treas. Reg Section 1.6011-4(b).
  • Such transactions must be reported by taxpayers to the IRS on Form 8886, Reportable Transactions Disclosure Statement (or successor form) and by material advisors on Form 8918, Material Advisor Disclosure Statement (or successor form).
  • Despite certain changes intended to narrow the scope of the rules, the Final Regulations are broad enough that complying with them will represent a very significant undertaking for many partnerships, partners and advisors.
 

In Final Regulations (TD 10028) released January 10, 2025, the IRS and Treasury Department have identified certain partnership related-party basis adjustment transactions, and substantially similar transactions, as "transactions of interest" under Treas. Reg. Section 1.6011-4(b), which must be reported to the IRS by participants and material advisors.

Background

Under the partnership tax rules, various transactions may result in basis adjustments to either the property of a partnership or property distributed by a partnership to its partners. These include rules under IRC Section 732, which relates to adjustments to the basis of property distributed by a partnership to a partner; IRC Section 734, which relates to adjustments to the basis of undistributed partnership property in connection with partnership distributions; and IRC Section 743, which relates to adjustments to the basis of partnership property in connection with sales or exchanges of partnership interests.

On June 17, 2024, the IRS and Treasury Department issued proposed regulations (Proposed Regulations) that would identify certain partnership related-party basis adjustment transactions as "transactions of interest" and thereby subject them to reporting under the reportable transaction rules1 and the material advisor rules.2 (See Tax Alert 2024-1273).3

Reportable transaction rules for taxpayers

Generally, every taxpayer that has participated in a reportable transaction and is required to file a tax return must file a disclosure statement with the IRS. Reportable transactions include listed transactions, confidential transactions, transactions with contractual protection, loss transactions and transactions of interest (TOIs). A TOI is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has identified by notice, regulation or other form of published guidance as a TOI.

A taxpayer that participates in a reportable transaction must attach a disclosure statement, Form 8886, Reportable Transaction Disclosure Statement (or successor form), to its federal tax return for each tax year in which it participates in the reportable transaction. The taxpayer must also send the disclosure statement to the IRS's Office of Tax Shelter Analysis (OTSA) at the same time that it first files a disclosure statement for a particular reportable transaction.

If a transaction becomes a TOI between the time a taxpayer files a tax return (including an amended return) reflecting its participation in the TOI and the end of the period of limitations for assessment for that tax year, the taxpayer must file the disclosure statement with the OTSA within 90 calendar days after the date on which the transaction becomes a TOI. This requirement exists regardless of whether the taxpayer participated in the transaction in the year the transaction became a TOI. Therefore, a taxpayer may have a disclosure obligation for already-completed transactions as well as current transactions.

Taxpayers that participate in a reportable transaction and fail to disclose may be subject to penalties under IRC Section 6707A. Those taxpayers may also be subject to other penalties, including accuracy-related penalties under IRC Sections 6662 or 6662A.

An advisor who has made or makes a tax statement with respect to the TOI and meets the criteria to become a material advisor may also have both a disclosure and a list maintenance obligation under IRC Section 6111 and IRC Section 6112, and the regulations thereunder.

The Final Regulations

Basis adjustment TOIs

The Final Regulations generally follow the approach taken by the IRS and the Treasury Department in the Proposed Regulations of identifying two types of basis adjustment transactions as basis adjustment TOIs: (i) certain transactions involving transfers of partnership interests between partners (Transfer TOIs), and (ii) certain transactions involving partnership distributions (Distribution TOIs) (together, Transfer TOIs and Distribution TOIs are referenced herein as Basis Adjustment TOIs).

Transfer TOIs. Under the Final Regulations, a Transfer TOI occurs when a partner transfers a partnership interest to a related partner in a nonrecognition transaction, the basis of one or more partnership properties is increased under IRC Section 743(b)(1) and (c), and the applicable threshold is met (as described later). A Transfer TOI does not include transfers on the death of a partner, which the Final Regulations define as a transfer of a partnership interest from a partner to the partner's estate or a deemed transfer from a grantor trust owned by the partner to a trust that becomes a separate entity for federal income tax purposes by reason of the partner's death.

The Final Regulations incorporate a new exception to the Transfer TOI rule (the Subsequent Transfer Exception) that applies where:

  • A partner receives an interest in a partnership from a person in a recognition transaction (the first transfer)
  • The basis of one or more partnership properties is increased under IRC Section 743(b), and
  • The partner (transferor) subsequently transfers the partnership interest to a person related to the transferor (related transferee) in what would otherwise be considered a Transfer TOI (the subsequent transfer)

Under the exception, the subsequent transfer will constitute a Transfer TOI only to the extent the related transferee's IRC Section 743(b) basis adjustment resulting from the subsequent transfer exceeds the amount of the remaining basis adjustment of the transferor from the first transfer that is attributable to the transferred interest (the excess amount), and the applicable threshold is met. For purposes of applying this exception, only the excess counts towards the applicable threshold.

For Transfer TOIs, the Final Regulations define "related partners" as a transferor and transferee of a partnership interest that are related to each other immediately before or immediately after an applicable transaction. "Related" under the Final Regulations means that the relevant partners have a relationship described in IRC Section 267(b) (without regard to IRC Section 267(c)(3)) or IRC Section 707(b)(1)). "Nonrecognition transaction" has the same meaning as in IRC Section 7701(a)(45) (i.e., any disposition of property in a transaction in which gain or loss is not recognized in whole or in part for purposes of subtitle A of the Code). "Recognition transaction" means a transaction other than a nonrecognition transaction.

Distribution TOIs. Distribution TOIs under the Final Regulations include the following types of transactions:

  • IRC Section 734(b) TOI. A transaction in which a partnership with two or more "related partners" distributes property to one of the related partners in a current or liquidating distribution, the partnership increases the basis of one or more of its remaining properties under IRC Section 734(b) and (c), and the applicable threshold is satisfied.
  • IRC Section 732(b) TOI. A transaction in which a partnership with two or more "related partners" distributes property to one of the related partners in liquidation of the person's partnership interest (or in complete liquidation of the partnership), the basis of one or more distributed properties is increased under IRC Section 732(b) and (c), and the applicable threshold is satisfied.
  • IRC Section 732(d) TOI. A transaction in which a partnership with two or more "related partners" distributes property to one of the related partners, the basis of one or more distributed properties is increased under IRC Section 732(d), the distributee partner acquired all or a part of its interest in the partnership in a transaction that would have been a Transfer TOI if the partnership had an IRC Section 754 election in effect for the year of the transfer, and the applicable threshold is satisfied.

For Distribution TOIs, the Final Regulations define "related partners" as two or more direct partners of a partnership that are related immediately before or immediately after an applicable transaction. "Related" has the same meaning as described previously in the case of Transfer TOIs.

Substantially similar transactions

The Final Regulations also apply to transactions that are "substantially similar" to the Basis Adjustment TOIs (Substantially Similar Transactions). The Final Regulations state that Substantially Similar Transactions include, but are not limited to:

  • Transactions that would be an IRC Section 734(b) TOI or an IRC Section 732(b) TOI except that:
    • The partners are not related
    • One or more partners is a tax-indifferent party that facilitates an increase in the basis of partnership property or an increase in the basis of property held by another partner in the partnership by receiving a distribution of property from the partnership or having a share of a corresponding decrease to the basis of partnership property
    • The applicable threshold is met
  • Transactions in which a partner transfers an interest in a partnership to a related partner in a recognition transaction, and the applicable threshold is met

Under the Final Regulations, a tax-indifferent party is a person (i) that is either not liable for federal

income tax by reason of the person's tax-exempt or, in certain cases, foreign status, or (ii)

to which any gain, or portion of any gain, that would have resulted from an applicable transaction,

if the property subject to a basis decrease in such transaction were sold immediately after such transaction, would not result in federal income tax liability for the person's tax year within which such gain would have been recognized.

For a transaction to be a Substantially Similar Transaction by reason of the participation of a tax-indifferent party, it must be the case that the party's tax-indifferent status is known or should be known to another person that participates in the transaction or to a partner in a partnership that participates in the transaction. In addition, a tax-indifferent party does not include a partnership or S corporation except in a case in which a principal purpose of the use of the partnership or S corporation is to avoid tax-indifferent party status.

Applicable threshold

The applicable threshold is met in any year by a partnership or partner if the sum of all basis increases from all transactions that would be Basis Adjustment TOIs without regard to whether the applicable threshold is met during such tax year (without netting for basis decreases) exceeds by at least $10 million the gain recognized from such transactions during the same tax year on which tax is imposed on any related partners (or tax-indifferent party, as the case may be) who are a party to such transactions. However, as to a transaction occurring within the six-year lookback period, the applicable threshold is increased to $25 million. For purposes of the Final Regulations, the six-year lookback period is the 72 months immediately preceding the first month of the taxpayer's most recent tax year that began before January 14, 2025.

For purposes of determining whether the applicable threshold is met for an IRC Section 734(b) TOI for a tax year, a basis increase is an increase to the adjusted basis of the partnership's property under IRC Section 734(b)(1) and (c) only to the extent of a related partner's share of the basis increase. A partner's share of a basis increase is determined immediately after the distribution under rules similar to Treas. Reg. Section 1.197-2(h)(12)(iv)(D).

In determining whether the applicable threshold is met for an IRC Section 732(b) TOI, a basis increase is an increase to the basis of property distributed to one of the related partners under IRC Section 732(b) or (c); this excludes, however, the amount of any basis increase that corresponds to a decrease to the basis of property distributed to unrelated partners (other than tax-indifferent partners) under IRC Section 732(b) and (c) or to unrelated partners' (other than tax-indifferent partners') shares of a corresponding decrease to the basis of the partnership's remaining property under IRC Section 734(b)(2) and (c). A partner's share of a basis decrease is determined immediately after the distribution under rules similar to Treas. Reg. Section 1.197-2(h)(12)(iv)(D). Similarly, for a Substantially Similar Transaction involving a basis increase under IRC Section 732(b) or IRC Section 734(b) facilitated by a tax-indifferent party, "for purposes of determining whether the applicable threshold is met for a [tax] year, a basis increase is an increase to the basis of property distributed to one of the partners under [IRC Section] 732(b) or (c) only to the extent of a corresponding decrease to the basis of property distributed to a tax-indifferent party under [IRC Section] 732(b) and (c) or to one or more tax-indifferent party's shares of a corresponding decrease to the basis of the partnership's remaining property under [IRC Section] 734(b)(2) and (c)."

Participation

As discussed next, each participant in a Basis Adjustment TOI or a Substantially Similar Transaction is required to comply with the reporting rules in the Final Regulations. A taxpayer has participated in a Basis Adjustment TOI or a Substantially Similar Transaction if it is a participating partnership, participating partner or related subsequent transferee.

A participating partner is any partner who:

  • Directly receives a distribution of property from a participating partnership in a Distribution TOI or a Substantially Similar Transaction, including a person who ceases to be a partner as a result of such transaction

or

  • Directly receives or transfers an interest in a participating partnership in a Transfer TOI or Substantially Similar Transaction, including a person who ceases to be a partner as a result of such transaction

A participating partnership is (i) any partnership that makes a distribution of property to a participating partner in a Distribution TOI or Substantially Similar Transaction, or (ii) any partnership in which an interest is transferred by a participating partner in a Transfer TOI or a Substantially Similar Transaction.

A related subsequent transferee means any person that is related to a participating partner and directly receives in a nonrecognition transaction a transfer (including a distribution) of property that was subject to an increase in basis from a Basis Adjustment TOI or Substantially Similar Transaction.

A participating partnership, participating partner, or related subsequent transferee also participates in a Basis Adjustment TOI or a Substantially Similar Transaction in any tax year in which its tax return reflects the tax consequences of a basis increase resulting from a Basis Adjustment TOI or a Substantially Similar Transaction.

For a publicly traded partnership (PTP), a participating partner means a partner of the PTP but only to the extent that the partner engages in a private transfer (as described in Treas. Reg. Section 1.7704-1(e)), a redemption or repurchase agreement (as described Treas. Reg. Section 1.7704-1(f)), or a private placement (as described Treas. Reg. Section 1.7704-1(h)) of a partnership interest with a related partner and the transaction is not otherwise excluded.

Information required to be disclosed

A participant in a Basis Adjustment TOI or a Substantially Similar Transaction must prepare and file Form 8886, Reportable Transaction Disclosure Statement (or successor form), with the IRS as part of its annual tax filing. The participant must also send the disclosure statement to OTSA at the same time that it files a disclosure statement for a particular reportable transaction. The following information must be disclosed:

  • The names and identifying numbers of all participants, including the participating partnership, participating partners and any related subsequent transferees
  • All basis adjustments resulting from Basis Adjustment TOIs.
    • This information must include: basis information, including the participating partnership's adjusted basis in the distributed property immediately before the distribution; any adjustments to basis under IRC Section 732(a)(2), (b), (d), or IRC Section 734(b); any adjustments under IRC Section 743(b) with respect to a participating partner that is transferred an interest in a participating partnership; and, with respect to a participating partner that transfers an interest in a participating partnership, that participating partner's adjusted basis in the participating partnership interest and share of the participating partnership's adjusted basis in its property immediately before the transfer;
  • Any Federal income tax consequences realized during the tax year (including subsequent realization of tax benefits) as a result of Transfer TOIs or Distribution TOIs (such as cost recovery allowances attributable to any increase in basis and any gain or loss attributable to
  • the disposition of property that was subject to an increase in basis as a result of a transaction)

Taxpayer disclosure requirements — Six-year lookback period

If a transaction becomes a TOI after a taxpayer files its tax return (including an amended return) reflecting its participation in the TOI and before the end of the period of limitations for assessment of tax for any tax year in which the taxpayer participated in the TOI, Treas. Reg. Section 1.6011-4(e)(2)(i) generally requires a disclosure statement to be filed with OTSA within 90 calendar days after the date on which the transaction became a TOI, regardless of whether the taxpayer participated in the transaction in the year the transaction became a TOI. However, the IRS may determine the time for disclosure of TOIs in the published guidance identifying the transaction.

The final regulations modify the disclosure rule in Treas. Reg. Section 1.6011-4(e)(2)(i); for purposes of determining a taxpayer's disclosure requirement with respect to a transaction that is identified as an Basis Adjustment TOI after the filing of the taxpayer's tax return (including an amended return) reflecting the taxpayer's participation in the TOI but before the end of the period of limitations for assessment of tax for such tax year), a participant must disclose the transaction under the TOI rules only if the transaction occurred within the six-year lookback period. In addition, Example 6 of Treas. Reg. Section 1.6011-18(g) of the Final Regulations seems to indicate broadly that no disclosure is required for transactions occurring before the six-year lookback period.

Material advisor disclosures

Material advisors to a Basis Adjustment TOI or a Substantially Similar Transaction must file disclosures with OTSA and are subject to penalties upon a failure to disclose. Treas. Reg. Section 301.6111-3(e) requires a material advisor's disclosure statement to be filed with the OTSA by the last day of the month following the end of the calendar quarter in which the advisor became a material advisor with respect to a transaction.

For a transaction that was not a reportable transaction but is identified as a TOI in published guidance after the occurrence of the events described in Treas. Reg. Section 301.6111-3(b)(4)(i), Treas. Reg. Section 301.6111-3(b)(4)(iii) treats the person as becoming a material advisor on the date the transaction is identified as a TOI. However, the Final Regulations state that material advisors are only required to disclose if they have made a tax statement with respect to an applicable transaction on or after the date that is six years before January 14, 2025. Given the six-year lookback period and the need for material advisors to identify and prepare Basis Adjustment TOI disclosures, the Final Regulations provide an extension of 90 additional calendar days after the date specified in Treas. Reg. Section 301.6111-3(e) for material advisors to meet their disclosure obligations, where the reporting obligation is triggered by tax statements made by the material advisors before January 14, 2025; where this extension applies, the disclosure must be filed by July 29, 2025.

If an advisor made or makes a tax statement about an applicable transaction after January 13, 2025, it appears that the normal reporting rules would apply. Generally, where the material advisor reporting requirements are met, the advisor must report the transaction by the last day of the month that follows the end of the calendar quarter in which the advisor became a material advisor to the reportable transaction.

Summary of Final Regulations' changes

The Final Regulations contain certain changes from the Proposed Regulations, including:

  • Increasing the applicable threshold for a transaction occurring within the six-year lookback period to $25 million and to $10 million for a transaction occurring after the six-year lookback period (previously all transactions were subject to a $5 million threshold)
  • Excluding from the applicable threshold basis increases attributable to unrelated parties as part of IRC Section 734(b) TOIs
  • Excluding from the applicable threshold a basis increase with a corresponding basis decrease borne by unrelated partners other than tax-indifferent partners for purposes of IRC Section 732(b) TOIs
  • Excepting certain transactions involving PTPs from the rules on Basis Adjustment TOIs
  • Amending the definition of "related partner" for purposes of a Transfer TOI to exclude a transferee that is unrelated to a transferor but is related to one or more of the partners in the partnership
  • Broadening the Proposed Regulations' exception for transfers resulting from the death of a partner
  • Adding the Subsequent Transfer Exception, which in some cases exempts from the Transfer TOI rules, a fact pattern in which a partner acquires a partnership interest in a recognition transaction, with a resulting IRC Section 743(b) adjustment, and that partner subsequently transfers the partnership interest to a related transferee
  • Including a knowledge element in the definition of tax-indifferent party
  • Providing limited extensions in time for certain participants and material advisors to file disclosures with the OTSA
  • Broadening the concept of tax-indifferent party to include parties who would be exempt from tax only on a portion of their gain if property subject to a basis decrease in an applicable transaction were sold for fair market value
  • Exempting from the Basis Adjustment TOI disclosure rules transactions that occurred before the start of a six-year lookback period

Implications

Despite certain changes intended to narrow the scope of the rules, the Final Regulations are broad enough that complying with them will represent a very significant undertaking for many partnerships, partners and advisors. Moreover, despite the changes made from the Proposed Regulations, the Final Regulations will likely apply to many routine and non-tax-motivated transactions.

With respect to past transactions, partnerships, partners, and their advisors will need to conduct a detailed review of transactions entered into the during the six-year lookback period in order to determine whether disclosure will be required. Especially for (i) taxpayers who enter into a large number of partnership transactions and (ii) advisors who advise on a large number of transactions, reviewing all transactions potentially subject to the Basis Adjustment TOI rules that were entered into during the six-year lookback period may be an extremely onerous task. For transactions occurring in prior years, it may be difficult for partnerships to determine the potential relatedness of persons who were historic partners at the time of the transaction. The difficulty of compliance will be compounded by the Substantially Similar Transaction rules, which require taxpayers and their advisors to consider, among other things, whether tax-indifferent parties (rather than related parties) were involved in a transaction and whether transfers of partnership interests between related parties in recognition transactions are subject to disclosure.

The Final Regulations reduced the retroactivity of the rules in a favorable way, as compared to the Proposed Regulations, by limiting retroactive reporting of Basis Adjustment TOIs to those that actually occurred within a six-year lookback window (e.g., 72 months immediately preceding the first month of the taxpayer's most recent tax year that began before January 14, 2025). The Final Regulations also favorably raise the applicable threshold to $25 million for any given tax year when considering reporting in the six-year lookback window.

The Final Regulations determine the applicable thresholds on an aggregate basis for a partnership or partner for the tax year in question, taking into account all basis adjustments from potentially applicable transactions for that year. Thus, once the threshold amount is exceeded, all potentially reportable transactions for the year in question are subject to the TOI reporting (even those with basis adjustments that may be well under the applicable threshold on a stand-alone basis).

While the Final Regulations provide an exception for certain PTP transactions, add the Subsequent Transfer Exception (described previously) and broaden the exception for transfers resulting from the death of a partner, the IRS and Treasury Department did not implement requests to exclude certain other common transactions, such as partnership incorporation transactions, mergers and divisions. Moreover, the Subsequent Transfer Exception appears to be drafted so narrowly that it will not cover many common restructurings. For example, it appears to permit only one subsequent transfer; if there are multiple subsequent transfers of the same partnership interest in nonrecognition transfers, any transfer after the first does not appear to be covered by the exception. In addition, the exception applies only if the initial acquisition of the partnership interest was in a "recognition transaction," which, for purposes of the Final Regulations, means a transfer in which all gain or loss is recognized. It thus appears that the exception would not apply to a fact pattern in which the initial acquisition of the partnership interest was in a transaction that was only partly taxable to the transferor.

As to the Substantially Similar Transaction rule, the IRS and Treasury Department added a knowledge component to the tax-indifferent party rule. However, the knowledge component of the test is satisfied as to a tax-indifferent party if that person's tax-indifferent party status is known or should be known to "any other person that participates" in the transaction "or to a partner in a partnership that participates" in the transaction. Thus, while not entirely clear, it seems possible that, if any participant in an applicable transaction has knowledge of a person's tax-indifferent party status, not only that participant but all other participants in the transaction will be subject to Basis Adjustment TOI reporting (even other participants who were not aware of the person's tax-indifferent party status).

As discussed previously, a partner or partnership that participates in a reportable transaction must attach a disclosure statement, Form 8886, Reportable Transaction Disclosure Statement (or successor form), to its tax return for each tax year in which it participates in a reportable transaction. The same disclosure must be sent to OTSA as of the first filing for a particular transaction. For any transaction that became a Basis Adjustment TOI after the filing of the participant's tax return as a result of the Final Regulations (e.g., as it relates to the six-year lookback), a participant will be treated as timely filing the required OTSA disclosure if they do so by July 14, 2025.

The 90-day extension of time afforded by the Final Regulations does not apply to all transactions entered into before issuance of the Final Regulations. The extension of time for Basis Adjustment TOI reporting by taxpayers (e.g., partnership and partners) applies only to transactions for which a tax return has already been filed as of the date that the Final Regulations were issued. If the tax return has not already been filed by January 14, 2025, the extension does not apply.

The 90-day extension of time for material advisors applies to advisors that made tax statements about the transaction in question in the six-year lookback period before January 14, 2025. Thus, where material advisor requirements are met for a transaction in the six-year lookback period, material advisors will be treated as timely filing the required disclosure if they do so by July 29, 2025. If an advisor made or makes a tax statement about an applicable transaction after January 13, 2025, normal reporting rules would appear to apply. Generally, where the material advisor reporting requirements are met, the advisor must report the transaction by the last day of the month following the end of the calendar quarter in which the advisor became a material advisor to the reportable transaction. For example, for material advisors that made tax statements during the first calendar quarter of 2025, and to which the extension does not apply, the reporting would be due by April 30, 2025.

Private equity and private capital fund (PE fund(s)) implications

We expect that the Final Regulations will significantly impact tax compliance burdens of PE funds. Many routine private fund transactions may be implicated, such as (i) continuation fund transactions (e.g., where a historic PE fund sells a partnership portfolio company to a new continuation fund to which it is related), and (ii) certain PE-backed partnership portfolio company sale transactions where a "blocker" C corporation is sold as part of the transaction and the blocker received pre-closing distributions of partnership interests.

The Final Regulations include several helpful exceptions relevant to PE funds, e.g., the "Subsequent Transfer Exception," which clarify that a PE fund purchaser that acquired a portfolio company and received an IRC Section 743(b) basis step-up adjustment, may undertake certain internal restructuring, non-recognition transactions post-acquisition without being subject to TOI reporting. Under the final regulations, where the Subsequent Transfer Exception applies, only any increase to tax basis resulting from the subsequent transfer (as compared to the historic transaction step-up), i.e., the "excess amount" described previously, is counted for threshold purposes. However, as discussed earlier, the Subsequent Transfer Exception appears to be limited to only a single subsequent transfer; this may limit its usefulness in multi-step reorganizations.

Investors in PE funds may request changes in their fund legal agreements (e.g., investor side letters) requiring the fund to provide prompt notice to the investors of any reportable transaction filing requirements so that the investors can also comply with their own reporting obligations. Thus, these new regulations may cause PE funds to have more onerous reporting requirements to their investors as well.

Many states conform to the US federal reportable transaction requirements. Thus, these new rules are expected to result in increased state tax reporting obligations as well.

In certain cases, private funds may find it prudent to file protective disclosures to mitigate potentially significant penalties under these new rules (i.e., generally, 75% of the decrease in tax shown on the return as a result of the transaction or the decrease that would have resulted from the transaction if the transaction were respected for federal tax purposes). Notably, a footnote to the final regulations provides that the transactions described above are TOIs, and not "listed transactions." If, instead, these transactions had been treated as listed transactions, a failure to disclose would have tolled a taxpayer's statute of limitations.

Executive action on regulations

Following the issuance of the Final Regulations, President Donald Trump ordered a "Regulatory Freeze Pending Review" (the Executive Action). See 90 Fed. Reg. 8,249 (Jan. 28, 2025). The Executive Action asked agency and department heads (e.g., the IRS and Treasury Department) to consider postponing for a 60-day period from January 20, 2025, any rules that have been published in the Federal Register and consider opening up a comment period to allow interested parties the ability to comment on issues of fact, law, and policy raised by such postponed rules.

Since release of the Executive Action, neither the IRS nor Treasury Department have stated any public intention to postpone application of the Final Regulations, which became effective January 14, 2025.

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Endnotes

1 Treas. Reg. Section 1.6011-4(a).

2 Treas. Reg. Section 301.6111-3.

3 Forthcoming proposed regulations described in Notice 2024-54, which generally provide new rules for basis-adjustment transactions involving partnerships and related partners, have not yet been issued. The Final Regulations discussed in this Alert are separate from, and do not rely on, the forthcoming proposed regulations described in Notice 2024-54.

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Contact Information

For additional information concerning this Alert, please contact:

Passthrough Transactions Group

FSO — Private Equity Tax

Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor

Document ID: 2025-0360