Form 8308, Report of a Sale or Exchange of Certain Partnership Interests

Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, is the IRS form a partnership files to report a partner's sale or exchange of all or part of a partnership interest when money or other property received is attributable to unrealized receivables or inventory items, known as a section 751(a) exchange.

The IRS instructions explain that a section 751(a) exchange occurs when money or any property is exchanged for a partnership interest, or part of one, that is attributable to unrealized receivables or inventory items. Generally, any sale or exchange of an interest at a time when the partnership has any unrealized receivables or inventory items is a section 751(a) exchange.

The form has four parts:

• Part I: transferor information, the beneficial owner of the interest immediately before the transfer.
• Part II: transferee information, the beneficial owner immediately after the transfer.
• Part III: the date of the sale or exchange and the type of interest transferred (capital, preferred, profits or other).
• Part IV: the partner's share of gain (loss) under sections 751(a) and 1(h)(5) and (6), reported in columns (a), (b1), (b2) and (c).

The form also tells the transferor that part of the gain must be treated as ordinary income and that a statement must be attached to the transferor's return. A transfer that is entirely a gift for federal income tax purposes is not a section 751(a) exchange, and no section 6050K returns or statements are required for a transfer that is not one.

A partnership must file a separate Form 8308 for each section 751(a) exchange of an interest in that partnership. The partnership also furnishes a Form 8308 with Parts I through III filled out to each transferor and each transferee.

Other groups and conditions in the IRS instructions:

• Partnerships in doubt. If a partnership is unsure whether its property is an unrealized receivable or inventory item, or whether a transfer is a section 751(a) exchange, it may file Form 8308 to avoid the risk of a failure-to-file penalty.
• Transferors. A transferor must notify the partnership of the exchange, unless Form 1099-B is required under section 6045. The transferor also attaches a separate statement to the income tax return for the year of the sale or exchange, as Regulations section 1.751-1(a)(3) requires.
• Transferees. They receive Parts I through III from the partnership.

Form 8308 does not have to be filed if Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, is required to be filed for the sale or exchange under section 6045. A partnership may rely on a written statement from the transferor that the transfer was not a section 751(a) exchange, unless it has knowledge to the contrary.

A partnership must file Form 8308 once it has notice of the section 751(a) exchange. It has notice when it receives the transferor's written notification (with both parties' names and addresses, the identifying numbers of the transferor and, if known, the transferee, and the date of the exchange), or when it knows of a transfer of an interest while it held unrealized receivables or inventory items.

Generally, file Form 8308 (Parts I through IV) as an attachment to Form 1065 for the partnership tax year that includes the last day of the calendar year in which the exchange took place. It is due when the partnership return is due, including extensions.

Copies of Parts I through III go to the transferor and transferee by January 31 of the year following the calendar year of the exchange or, if later, 30 days after the partnership has notice. Partnerships no longer have to furnish Part IV by January 31.

Late or corrected reporting follows other timing. A non-BBA partnership notified after filing files Form 8308 with an amended Form 1065 within 30 days of notification. A partnership that reported the correct gain but did not file Form 8308 files it separately within 30 days of notification.

Form 8308 is filed with the IRS as an attachment to the partnership's return or, in some late-reporting cases, on its own; copies of Parts I through III go to the partners.

• With Form 1065: attach the completed Form 8308, with all of Parts I through IV filled out, to Form 1065, U.S. Return of Partnership Income, and file it as the Form 1065 instructions direct.
• With an amended return: a non-BBA partnership notified of a missed or incorrect section 751(a) exchange files Form 8308 with an amended Form 1065 within 30 days of notification, with the service center where Form 1065 was filed, and gives amended Schedules K-1 to the affected partners.
• With an AAR: a BBA partnership in the same situation files an administrative adjustment request and attaches Form 8308. See the instructions for Forms 8082 and 1065-X, and IRS.gov/BBAAAR.
• By itself: a partnership that did not file Form 8308 with its Form 1065 but reported the correct gain files it separately within 30 days of notification with the service center where Form 1065 was filed. Sign the form only if you file it by itself and not with Form 1065.
• To partners: furnish a Form 8308 with Parts I through III completed to each transferor and transferee.

Do not send Form 8308 to the Tax Forms and Publications Division address printed in the instructions; it is only for comments. FillingPDF lets you fill out and download the PDF; submission follows the channels above.