[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 367-369]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.6050K-1  Returns relating to sales or exchanges of certain 
partnership interests.

    (a) Partnership return required--(1) In general. Except as otherwise 
provided in this paragraph (a), a partnership shall make a separate 
return on Form 8308 with respect to each section 751(a) exchange (as 
defined in paragraph (a)(4)(i) of this section) of an interest in such 
partnership which occurs after December 31, 1984. A partnership that is 
in doubt as to whether partnership property constitutes section 751 
property to any extent or as to whether a transfer of a partnership 
interest constitutes a section 751(a) exchange may file Form 8308 in 
order to avoid the risk of incurring a penalty under section 6721. The 
penalty under section 6721 will generally apply, however, to 
partnerships that do not file Form 8308 where in fact a section 751(a) 
exchange occurred, except as provided in paragraphs (a)(2) and (e) of 
this section.
    (2) Return required under section 6045. No return shall be required 
under section 6050K(a) and paragraph (a)(1) of this section with respect 
to the sale or exchange of a partnership interest if a return is 
required to be filed under section 6045 with respect to such sale or 
exchange.
    (3) Single or composite documents. The Commissioner may authorize 
the use, at the option of the partnership, of a single document which 
includes all of the partnership's returns for a calendar year in the 
case of partnerships required under paragraph (a)(1) of this section to 
make 25 or more returns on Form 8308 for any calendar year. In addition, 
the Commissioner may authorize the use for this purpose, also at the 
option of such a partnership, of a composite document. These 
authorizations shall be subject to such conditions, limitations, and 
special rules governing the preparation, execution, filing, and 
correction thereof as the Commissioner may deem appropriate. Such 
composite document shall consist of a form prescribed by the 
Commissioner and an attachment or attachments of magnetic tape or other 
approved media. To the extent that the use of a single or composite 
document has been authorized by the Commissioner, references in this 
section to Form 8303 shall be deemed to refer also to returns included 
in a single or composite document under this paragraph (a)(3). Any 
single or composite document so authorized shall include the information 
required to be provided on Form 8308 under paragraph (b) of this section 
with respect to each section 751(a) exchange.
    (4) Definitions. For purposes of section 6050K of the Code and this 
section--
    (i) Section 751(a) exchange. The term section 751(a) exchange means 
any sale

[[Page 368]]

or exchange of a partnership interest (or portion thereof) in which any 
portion of any money or other property received by a transferor partner 
in exchange for all or a part of his or her interest in the partnership 
is attributable to section 751 property. The term does not include a 
distribution which is treated as a sale or exchange between the 
distributee and the partnership under section 751(b) of the Code.
    (ii) Section 751 property. The term section 751 property means 
unrealized receivables, as defined in section 751(c) of the Code, and 
inventory items which have appreciated substantially in value 
(``substantially appreciated inventory items''), as defined in section 
751(d) of the Code.
    (iii) Transferor and transferee. The term transferor means the 
beneficial owner of a partnership interest immediately before the 
transfer of that interest. The term ``transferee'' means the beneficial 
owner of a partnership interest immediately after the transfer of that 
interest. However, if a partnership does not know the identity of the 
beneficial owner of an interest in the partnership, the record holder of 
such interest shall be treated as the transferor or transferee (as the 
case may be) for purposes of paragraphs (b) and (c) of this section.
    (b) Contents of return. The return on Form 8308 shall 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.
    (c) Statement to be furnished to transferor and transferee. 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 shall use a 
copy of the completed Form 8308 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--
    (1) The information shown on the statement has been supplied to the 
Internal Revenue Service,
    (2) A transferor of a partnership interest in a sale or exchange 
described in section 751 (a) of the Internal Revenue Code is required to 
treat a portion of any gain or loss resulting from the sale or exchange 
as ordinary income or loss, and
    (3) The transferor in a section 751 (a) sale or exchange is required 
under paragraph (a) (3) of Sec.  1.751-1 to attach a statement relating 
to the sale or exchange to his or her income tax return for the taxable 
year in which the sale or exchange occurred.
    (d) Requirement that transferor notify partnership--(1) In general. 
The transferor of any partnership interest in a section 751 (a) exchange 
shall notify the partnership of such exchange in writing within 30 days 
of the exchange (or, if earlier, January 15 of the calendar year 
following the calendar year in which the exchange occurred). The written 
notification from the transferor shall include the following 
information:
    (i) The names and addresses of the transferor and transferee in the 
section 751 (a) exchange;
    (ii) The taxpayer identification numbers of the transferor and, if 
known, of the transferee; and
    (iii) The date of the exchange.

Any transferor who notified a partnership under section 6050K (c) (1) 
prior to January 22, 1986 by a notification that does not meet the 
requirements of this paragraph (d) shall furnish such partnership with 
the written notification described in this paragraph (d) on or before 
February 21, 1986.

[[Page 369]]

    (2) Return required under section 6045. No transferor shall be 
required to notify a partnership of the sale or exchange of a 
partnership interest under section 6050K (c) (1) or paragraph (d) (1) of 
this section if a return is required to be filed under section 6045 with 
respect to such sale or exchange.
    (e) Partnership not required to make a return or furnish statements 
under this section until it has notice of the exchange. A partnership 
shall not be required to make a return or furnish statements under 
section 6050K and this section with respect to any section 751 (a) 
exchange until it has been notified of the exchange. For purposes of 
section 6050K (c) (2) and this section, a partnership is notified of a 
section 751 (a) exchange when either:
    (1) The partnership receives the written notification from the 
transferor required under paragraph (d) of this section; or
    (2) The partnership has knowledge that there has been a transfer of 
a partnership interest or any portion thereof, and, at the time of the 
transfer, the partnership had any section 751 property. However, no 
return or statements are required under section 6050K if the transfer 
was not a section 751 (a) exchange (e.g., a transfer which in its 
entirety constitutes a gift for federal income tax purposes). For 
purposes of this paragraph (e) (2), the partnership may rely on a 
written statement from the transferor that the transfer was not a 
section 751 (a) exchange in the absence of knowledge to the contrary. 
For rules applicable where the partnership is in doubt as to whether 
partnership property constitutes section 751 property to any extent or 
as to whether a transfer of a partnership interest constitutes a section 
751 (a) exchange, see paragraph (a) (1) of this section.
    (f) Partnership return is to be attached to Form 1065--(1) In 
general. Any partnership return on Form 8308 required under this section 
shall be filed as an attachment to the partnership's Form 1065 for its 
taxable year in which the calendar year in which the section 751 (a) 
exchange occurred ends and shall be filed at the time (determined with 
regard to any extension of time for filing) and place prescribed for 
filing of the partnership's Form 1065 for that taxable year (see 
paragraph (e) of Sec.  1.6031-1 for the time and place for filing Form 
1065).
    (2) Notification after Form 1065 is filed. If a partnership is 
notified of an exchange (as defined in paragraph (e) of this section) 
after the partnership has filed Form 1065 for the taxable year with 
respect to which the exchange should have been reported, Form 8308 shall 
be filed with the service center or other Internal Revenue office with 
which the partnership's Form 1065 was filed, on or before the thirtieth 
day after the partnership is notified of the exchange.
    (g) Penalties. For penalties for failure of:
    (1) Transferors to furnish the notification required by paragraph 
(d) of this section see section 6722 (b);
    (2) Partnerships to furnish any statement required under paragraph 
(c) of this section see section 6722 (a); and
    (3) Partnerships to file the return on Form 8308 as required by 
paragraph (a) of this section see section 6721.

[T.D. 8119, 52 FR 41, Jan. 2, 1987]