IRS grants limited relief for incomplete Form 8308 for 2024 tax year

The IRS has provided penalty relief (Notice 2025-02) for partnerships allowing them until the due date of the partnership return to furnish Part IV of Form 8308 statements to partners for sales or exchanges of partnership interests in 2024 that include certain unrealized receivables or inventory items in a Section 751(a) exchange.

The full and complete Form 8308 statement would otherwise be due to partners by Jan. 31, 2025 (or within 30 days after the partnership is notified of the transfer if later), and partnerships must still furnish a Form 8308 statement to partners with Parts I, II, and II by this date. This relief is similar to relief provided for the 2023 year, which was the first year for which expanded reporting on Form 8308 was added.

Section 6050K generally requires partnerships to file Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, with the Form 1065 to report any sale or exchange of a partnership interest at a time when the partnership has any unrealized receivables or inventory items (“hot assets”) in a Section 751(a) exchange. Partnerships must also furnish a Form 8308 or an equivalent statement to both the transferor and transferee of a partnership interest by the later of Jan. 31 following the calendar year of the exchange, or 30 days after the partnership is notified of the transfer.

The IRS released a revised version of Form 8308 in October of 2024 for 2024 transfers that, in Part IV, requires a partnership to report, among other items, the partnership’s and the transferor partner’s share of Section 751 gain and loss, any collectibles gain under Section 1(h)(5), and any unrecaptured Section 1250 gain under Section 1(h)(6). Part IV was added for 2023 transfers in the October 2023 version of Form 8308. Since then, taxpayers have expressed concerns to the IRS that many partnerships would be unable to furnish the Part IV information by Jan. 31 following the calendar year of the transfer, because, in many cases, they did not yet have the required information.

Penalty relief

Notice 2025-02 provides penalty relief for failure to furnish a complete Form 8308 to transferees and transferors for 2024 transfers if the partnership fulfills both of the following requirements:

• Furnishing a timely and correct copy of Parts I, II, and III of Form 8308, or a statement that includes the same information by the later of (a) Jan. 31, 2025, or (b) 30 days after the partnership is notified of the Section 751(a) exchange
• Furnishing a copy of the complete Form 8308, including Part IV, or a statement that includes the same information, by the later of (a) the due date of the partnership’s Form 1065 (including extensions), or (b) 30 days after the partnership is notified of the Section 751(a) exchange

Notice 2025-02 does not provide relief with respect to a transferor partner’s failure to furnish the notification to the partnership required by Treas. Reg. Sec. 1.6050K-1(d). The notice also does not provide relief with respect to filing Form 8308 as an attachment to a partnership’s Form 1065. Thus, the notice does not provide relief from penalties for failure to file correct information returns.