Prop. regs. would modify reporting obligations for Form 8308, Part IV

The IRS on Monday issued proposed regulations (REG-108822-25) that would modify information-reporting obligations for Part IV of Form 8308, Report of a Sale or Exchange of Certain Partnership Interests,with respect to sales or exchanges of certain interests in partnerships owning inventory or unrealized receivables.

The proposed regulations would remove Regs. Sec. 1.6050K-1(c)(2), thereby eliminating the requirement that partnerships furnish the information reported in Part IV of the Form 8308 by Jan. 31 of the year following the calendar year in which a Sec. 751(a) exchange occurred.

The proposed regulations would also remove the reference to a “completed copy of Form 8308” and replace it with a reference to “a copy of Form 8308 filled out in accordance with the instructions to the form.” In addition, the IRS would update the instructions for Form 8308 to provide that only the information in Parts I, II, and III is required by the due dates of Sec. 6050K.

The changes mean a partnership would be required to furnish the information reported on only Parts I, II, and III of Form 8308, or a statement that includes the same information, to the transferor and transferee in a Sec. 751(a) exchange by either Jan. 31 of the year following the calendar year in which the Sec. 751(a) exchange occurred or 30 days after the partnership has received notice of the exchange as specified under Sec. 6050K and Regs. Sec. 1.6050K-1, whichever date is later.

The proposed regulations also include updated instructions for Form 8308 to make clear that a partnership must continue to file a completed Form 8308, including Part IV, as an attachment to its Form 1065, U.S. Return of Partnership Income. The partnership also must continue to report the information required of the transferor in Regs. Sec. 1.751-1(a)(3) to the transferor (including the information required in Part IV of the Form 8308), in the Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., issued to the transferor partner as provided by the form and instructions to the Schedule K-1 (Form 1065).

The proposed regulations also would modify Regs. Sec. 1.6050K-1(c)(1)(i) to clarify that the partnership will be providing to the IRS the information included on a substitute statement furnished in lieu of a Form 8308 under Regs. Sec. 1.6050K-1(c)(1).

Proposed applicability date

The IRS proposed that Regs. Sec.1.6050K-1(c)(2) be removed on the date these regulations are published as final regulations in the Federal Register. The amendment to Regs. Sec. 1.6050K-1(c)(1)(i) is proposed to apply to returns filed for tax years ending on or after the date these regulations are published as final regulations in the Federal Register.

However, the IRS said a partnership may rely on these proposed regulations, and the description of the anticipated changes to the instructions to Form 8308 contained in the preamble, with respect to Sec. 751(a) exchanges occurring on or after Jan. 1, 2025, and before the date these regulations are published as final regulations in the Federal Register.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.