[Federal Register Volume 90, Number 158 (Tuesday, August 19, 2025)]
[Proposed Rules]
[Pages 40269-40272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-15750]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-108822-25]
RIN 1545-BR54
Returns Relating to Sales or Exchanges of Certain Partnership
Interests
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations modifying
information reporting obligations with respect to sales or exchanges of
certain interests in partnerships owning inventory or unrealized
receivables. The proposed regulations affect partnerships.
DATES: Written or electronic comments and requests for a public hearing
must be received by September 18, 2025.
ADDRESSES: Commenters are strongly encouraged to submit public comments
and requests for a public hearing electronically via the Federal
eRulemaking Portal at https://www.regulations.gov (indicate IRS and
REG-108822-25) by following the online instructions for submitting
comments and requests for a public hearing. Requests for a public
hearing must be submitted as prescribed in the ``Comments and Requests
for a Public Hearing'' section. Once submitted to the Federal
eRulemaking Portal, comments cannot be edited or withdrawn. The
Department of the Treasury (Treasury Department) and the IRS will
publish for public availability any comment submitted to the IRS's
public docket. Send paper submissions to: CC:PA:01:PR (REG-108822-25),
Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Jeremy Brown, (202) 317-5279 (not a toll-free number); concerning the
submission of comments, contact the Publications and Regulations
Section of the Office of Associate Chief Counsel (Procedure and
Administration) by email at [email protected] (preferred) or by
telephone at (202) 317-6901 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Authority
This document contains proposed amendments to the Income Tax
[[Page 40270]]
Regulations (26 CFR part 1) under section 6050K of the Internal Revenue
Code (Code). Section 6050K(a) provides that, except as provided in
regulations prescribed by the Secretary of the Treasury or the
Secretary's delegate (Secretary), a partnership is required to file a
return if there is an exchange described in section 751(a) of the Code
of any interest in the partnership during any calendar year. Section
6050K(a) also contains express delegations of authority for the
Secretary to promulgate regulations prescribing the information
required to be disclosed on such partnership returns, the manner in
which such returns are made, and the due date of such returns.
Section 6031(a) of the Code provides an express grant of authority
for the Secretary to prescribe in forms or regulations partnership
reporting information required ``for the purpose of carrying out the
provisions of subtitle A.''
Section 7805(a) of the Code authorizes the Secretary to ``prescribe
all needful rules and regulations for the enforcement of [the Code],
including all rules and regulations as may be necessary by reason of
any alteration of law in relation to internal revenue.''
Background
Section 741 of the Code provides that gain or loss recognized by a
transferor partner upon sale or exchange of a partnership interest is
considered as gain or loss from the sale or exchange of a capital
asset, except as provided in section 751. Section 751(a) provides that
the amount of any money, or the fair market value of any property,
received by a transferor partner in exchange for all or a part of the
transferor partner's interest in the partnership attributable to (1)
unrealized receivables of the partnership, or (2) inventory items of
the partnership, will be considered as an amount realized from the sale
or exchange of property other than a capital asset. Section 1.6050K-
1(a)(4)(i) refers to a sale or exchange to which section 751(a) applies
as a ``section 751(a) exchange.''
Section 6050K(a) requires a partnership to file a return if there
is a section 751(a) exchange of any interest in the partnership during
any calendar year. Section 6050K(a) further provides that the return
must state the name and address of the transferee and transferor in the
section 751(a) exchange and such other information as the Secretary may
by regulations prescribe.
Section 1.6050K-1(a)(1) generally requires a partnership to make a
separate return using Form 8308, Report of a Sale or Exchange of
Certain Partnership Interests, with respect to each section 751(a)
exchange. Section 1.6050K-1(b) requires the Form 8308 to include the
following information: (1) the names, addresses, and taxpayer
identification numbers of the transferee and transferor in the exchange
and of the partnership filing the return; (2) the date of the exchange;
and (3) such other information as may be required by Form 8308 or its
instructions. Section 1.6050K-1(f)(1) requires a partnership to file
Form 8308 as an attachment to its Form 1065, U.S. Return of Partnership
Income, for the partnership's taxable year that includes the last day
of the calendar year in which the section 751(a) exchange took place.
Section 6050K(b) requires a partnership to provide certain
information to transferors and transferees that are parties to a
section 751(a) exchange on or before January 31 of the year following
the calendar year of the section 751(a) exchange. Among other things,
the information provided to each transferor and transferee must include
the information required to be shown on the partnership's return under
section 6050K(a) with respect to such person.
Section 6050K(c)(1) provides that the transferor of the partnership
interest must notify the partnership of any exchange described in
section 6050K(a). Under section 6050K(c)(2), a partnership is not
required to make a return under section 6050K with respect to any
exchange until the partnership is notified of such exchange.
Section 1.6050K-1(c)(1) clarifies that each partnership that is
required to file a Form 8308 must furnish a statement to the transferor
and transferee by the later of (1) January 31 of the year following the
calendar year in which the section 751(a) exchange occurs, or (2) 30
days after the partnership receives notice of the exchange as specified
under section 6050K(c) and Sec. 1.6050K-1(e). A partnership generally
must use a copy of the completed Form 8308 as the required statement.
On November 30, 2020, the Treasury Department and the IRS published
in the Federal Register final regulations (TD 9926, 85 FR 76910) that
added Sec. 1.6050K-1(c)(2) to require a partnership to furnish to a
transferor partner the information necessary for the transferor to make
the transferor partner's required statement in Sec. 1.751-1(a)(3).
Section 1.751-1(a)(3) requires a transferor partner in a section 751(a)
exchange to submit with the transferor partner's income tax return for
the taxable year in which the sale or exchange occurs a statement
separately stating the date of the sale or exchange, the amount of any
gain or loss attributable to section 751 property, and the amount of
any gain or loss attributable to capital gain or loss on the sale of
the partnership interest. After the promulgation of Sec. 1.6050K-
1(c)(2), the IRS revised Form 8308.
Part IV of the revised Form 8308 requires a partnership to report,
among other items, the partnership's gain or loss from a deemed sale
under section 751 and the transferor partner's share of such amount. As
a result of the changes to Part IV of Form 8308, a partnership's
obligation to report the gain or loss attributable to a section 751(a)
exchange to a transferor is effectively accelerated to January 31 of
the year following the section 751(a) exchange, even though Sec.
1.751-1(a)(3) generally does not require the transferor partner to
report such information to the IRS until the transferor partner files
the partner's income tax return for the taxable year in which the sale
or exchange occurs, the due date of which can be several months after
January 31.
Following the revisions to Form 8308, the Treasury Department and
the IRS received comments from stakeholders that many partnerships are
unable to furnish the information required in Part IV of the Form 8308
to transferors and transferees by the January 31 due date because, in
many cases, partnerships do not have all the information required by
Part IV of the Form 8308 by January 31 of the year following the
calendar year in which the section 751(a) exchange occurred.
On January 11, 2024, the IRS published Notice 2024-19, 2024-5
I.R.B. 627, which provided limited relief from penalties under section
6722 of the Code for partnerships that failed to furnish a completed
Part IV of Form 8308 by January 31, 2024, for section 751(a) exchanges
during calendar year 2023. Penalty relief in Notice 2024-19 was
contingent on the partnership (1) timely and correctly furnishing 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 section 751(a) exchange, and (2) furnishing to 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 under Sec. 1.6050K-1(c), 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. On December 13, 2024, the IRS published Notice 2025-2, 2025-3
I.R.B. 418, which
[[Page 40271]]
extended the relief provided in Notice 2024-19 for partnerships that
fail to complete Part IV of Form 8308 by January 31, 2025, with respect
to section 751(a) exchanges occurring during calendar year 2024.
After considering stakeholder feedback regarding the undue burdens
imposed by Sec. 1.6050K-1(c)(2) after the revision of Form 8308, the
Treasury Department and the IRS are issuing these proposed regulations
to propose the removal of Sec. 1.6050K-1(c)(2).
Explanation of Provisions
The proposed regulations would remove Sec. 1.6050K-1(c)(2) to
eliminate the requirement that partnerships furnish the information
required in Part IV of the Form 8308 by January 31 of the year
following the calendar year in which the section 751(a) exchange
occurred. The proposed regulations would also modify Sec. 1.6050K-
1(c)(1) by removing the reference to a ``completed copy of Form 8308''
and replacing it with a reference to ``a copy of Form 8308 filled out
in accordance with the instructions to the form.'' In addition, the
Treasury Department and 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 section 6050K.
As a result of the proposed changes to Sec. 1.6050K-1 and the
associated changes in the instructions to Form 8308, 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 section 751(a)
exchange by the later of (1) January 31 of the year following the
calendar year in which the section 751(a) exchange occurred, or (2) 30
days after the partnership has received notice of the exchange as
specified under section 6050K and Sec. 1.6050K-1.
Further, the Treasury Department and the IRS would update the
Instructions for Form 8308 to make clear that a partnership must file a
completed Form 8308, including Part IV, as an attachment to its Form
1065. Accordingly, and pursuant to Sec. 1.6031(a)-1(a)(2), which
provides that a partnership return must contain the information
required by the prescribed form and the accompanying instructions, a
partnership would be required to file the completed Form 8308,
including Part IV, as an attachment to its Form 1065, for the taxable
year of the partnership that includes the last day of the calendar year
in which the section 751(a) exchange took place. Thus, the current
requirement that a partnership file a completed Form 8308, including
Part IV, as an attachment to its Form 1065 would remain unchanged by
these proposed regulations.
Pursuant to Sec. 1.6031(b)-1T(a)(3), which provides, in part, that
a partnership generally must furnish a written statement to each
partner containing any additional information that may be required by
form or instructions, the partnership will also continue to be required
to report the information required of the transferor in 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).
Finally, the proposed regulations would modify 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 Sec. 1.6050K-1(c)(1).
Proposed Applicability Date
Section 1.6050K-1(c)(2) is proposed to be removed on the date these
regulations are published as final regulations in the Federal Register.
The amendment to Sec. 1.6050K-1(c)(1)(i) is proposed to apply to
returns filed for taxable years ending on or after the date these
regulations are published as final regulations in the Federal Register.
However, a partnership may rely on these proposed regulations, and the
description of the anticipated changes to the instructions to Form 8308
contained in this preamble, with respect to section 751(a) exchanges
occurring on or after January 1, 2025, and before the date these
regulations are published as final regulations in the Federal Register.
Special Analyses
I. Regulatory Planning and Review
These proposed regulations are not subject to review under section
6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement
(July 4, 2025) between the Treasury Department and the Office of
Management and Budget (OMB) regarding review of tax regulations.
Therefore, a regulatory impact assessment is not required.
The Executive Order 14192 designation for this rule is expected to
be deregulatory.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) generally
requires that a Federal agency obtain the approval of the OMB before
collecting information from the public, whether such collection of
information is mandatory, voluntary, or required to obtain or retain a
benefit. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless the
collection of information displays a valid control number. These
proposed regulations do not impose a new or modify an existing
collection of information.
III. Regulatory Flexibility Act
It is hereby certified that the proposed regulations would not have
a significant economic impact on a substantial number of small entities
pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6). This
rule would affect partnerships for which there is a section 751(a)
exchange (as defined in Sec. 1.6050K-1(a)(4)(i)). These proposed
regulations would likely affect a substantial number of small entities
organized as partnerships for Federal tax purposes, but the impact of
the proposed regulations would be limited because the proposed
regulations would delay the date by which partnerships must provide
transferors of interests in the partnership the information necessary
for the transferor to make the transferor's required statement under
Sec. 1.751-1(a)(3). This delay would benefit the partnerships by
providing additional time to furnish the information but would not have
a significant economic impact. Accordingly, a regulatory flexibility
analysis under the Regulatory Flexibility Act is not required. The
Treasury Department and the IRS invite comments on the impact of the
proposed regulations on small entities.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandate Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
State, local, or Tribal government, in the aggregate, or by the private
sector, of $100 million (updated annually for inflation). These
proposed regulations do not include any Federal mandate that may result
in expenditures by State, local, or Tribal governments or by the
private sector in excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any
[[Page 40272]]
rule that has federalism implications if the rule either imposes
substantial, direct compliance costs on State and local governments,
and is not required by statute, or preempts State law, unless the
agency meets the consultation and funding requirements of section 6 of
the Executive order. These proposed regulations do not have federalism
implications and do not impose substantial, direct compliance costs on
State and local governments or preempt State law within the meaning of
the Executive order.
VI. Small Business Administration
Pursuant to section 7805(f), this notice of proposed rulemaking has
been submitted to the Chief Counsel for the Office of Advocacy of the
Small Business Administration for comment on its impact on small
business.
Comments and Request for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to comments that are submitted timely to
the IRS as prescribed in the preamble under the ADDRESSES section. The
Treasury Department and the IRS request comments on all aspects of the
proposed regulations. Any comments submitted will be made available at
https://www.regulations.gov or upon request. Once submitted to the
Federal eRulemaking Portal, comments cannot be edited or withdrawn. A
public hearing will be scheduled if requested in writing by any person
that timely submits written comments. If a public hearing is scheduled,
notice of the date, time, and place for the public hearing will be
published in the Federal Register.
Statement of Availability of IRS Documents
IRS notices and other guidance cited in this preamble are published
in the Internal Revenue Bulletin (or Cumulative Bulletin) and are
available from the Superintendent of Documents, U.S. Government
Publishing Office, Washington, DC 20402, or by visiting the IRS website
at https://www.irs.gov.
Drafting Information
The principal authors of these proposed regulations are Jeremy
Brown and Benjamin Weaver of the Office of Associate Chief Counsel
(Passthroughs, Trusts and Estates). However, other personnel from the
Treasury Department and the IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and IRS propose to amend 26
CFR part 1 as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.6050K-1 also issued under 26 U.S.C. 6050K(a).
* * * * *
0
Par. 2. Section 1.6050K-1 is amended by:
0
1. Adding a heading for paragraph (c);
0
2. Revising the introductory text of paragraph (c)(1);
0
3. Revising paragraph (c)(1)(i);
0
4. Removing paragraph (c)(2) and redesignating paragraph (c)(3) as new
paragraph (c)(2); and
0
5. Revising paragraph (h).
The revisions read as follows:
Sec. 1.6050K-1 Returns relating to sales or exchanges of certain
partnership interests.
* * * * *
(c) Statement to be furnished to transferor and transferee--(1) In
general. Every partnership required to file a return under paragraph
(a) of this section must furnish to each person whose name is required
to be set forth in such return a written statement on or before January
31 of the calendar year following the calendar year in which the
section 751(a) exchange occurred to which the return under paragraph
(a) relates (or, if later, 30 days after the partnership is notified of
the exchange as defined in paragraph (e) of this section). The
partnership must use a copy of the Form 8308, filled out in accordance
with the instructions accompanying the form, as a statement unless the
Form 8308 contains information with respect to more than one section
751(a) exchange (see paragraph (a)(3) of this section). If the
partnership does not use a copy of Form 8308 as a statement, the
statement shall include the information required to be shown on Form
8308 with respect to the section 751(a) exchange to which the person to
whom the statement is furnished is a party. In addition, it shall state
that--
(i) The information shown on the statement will be supplied to the
Internal Revenue Service.
* * * * *
(h) Applicability date. Paragraphs (c)(1) introductory text and
(c)(1)(i) of this section apply to returns filed for taxable years
ending on or after [date of publication of final regulations in the
Federal Register]. Paragraph (c)(2) of this section applies to returns
filed on or after November 30, 2020. Paragraph (d)(3) of this section
applies to transfers that occur on or after November 30, 2020.
Edward T. Killen,
Acting Chief Tax Compliance Officer.
[FR Doc. 2025-15750 Filed 8-18-25; 8:45 am]
BILLING CODE 4830-01-P