IRS Extends Deadline for Form 8038 Issuance to Partners
A partnership is required to attach a separate Form 8308 to its Form 1065, U.S. Return of Partnership Income, to report each sale or exchange of all, or a portion of, a partnership interest where there has been a “§751(a) exchange.” A §751(a) exchange occurs when money or other property received on the sale of a partnership interest is attributable to the selling partner’s share of a partnership’s unrealized receivables or inventory items. The partnership is also required to issue Form 8308 to each transferor and transferee partner by January 31 of the year following the calendar year in which the §751(a) exchange occurred, or if later, 30 days after the partnership receives notice of the exchange.
The Treasury Department and IRS are aware that many partnerships cannot timely obtain the information necessary to comply with the January 31, 2025, due date for issuing Form 8308 to transferor and transferee partners related to §751(a) transactions that occurred during calendar year 2024. Consequently, on December 13, 2024, the IRS issued Notice 2025-2 and extended the due date for partnerships required to issue Form 8308 to the transferor and transferee partners for §751(a) transactions that occurred during the calendar year 2024 to the later of the due date of the partnership’s Form 1065 (including extensions) or 30 days after the partnership is notified of the §751(a) exchange. The extension is granted under Notice 2025-2 only if the partnership (i) timely and correctly furnishes a copy of Parts I, II, and III of Form 8038, which pertain to identifying information contained on Form 8308, by the later of January 31, 2025, or 30 days after the partnership is notified of the §751(a) exchange, and (ii) the partnership furnishes to the transferor and transferee partners a complete Form 8308, including the purchase price allocation in Part IV, by the extended due date discussed above. The extension granted by Notice 2025-2 is welcomed by tax professionals and is similar to the extension granted last year in Notice 2024-19.
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