Certain Partnership Related-Party Basis Adjustment Transactions as Transactions of Interest
Published Date: 1/14/2025
Rule
Summary
Starting January 14, 2025, the IRS is making certain partnership deals that adjust tax bases official 'transactions of interest.' This means people involved and their advisors must report these deals to the IRS or face penalties. If you’re part of these partnerships or help with them, get ready to file new disclosures and stay on the IRS’s good side!
Analyzed Economic Effects
5 provisions identified: 1 benefits, 3 costs, 1 mixed.
New Partnership Reporting Duty
If you are a partner in certain related-party partnership transactions that shift tax basis, you must file a disclosure with the IRS's Office of Tax Shelter Analysis because the IRS now calls those deals "transactions of interest." These final regulations take effect January 14, 2025, and participants who fail to disclose are subject to penalties.
Reporting Thresholds Set ($10M / $25M)
The final rules require disclosure only for partnership related-party basis adjustments that meet large dollar thresholds: $10 million or more for the regular threshold and $25 million for later-identified transactions. These dollar thresholds determine whether the new reporting rule applies.
Material Advisors Must Always Disclose
If you are a material advisor to one of these partnership transactions, you must file the disclosure required under sections 6111/6112 by the usual deadline (by the last day of the month after the quarter in which you became a material advisor), and the final rule does not add an "actual knowledge" exception. Material advisors are subject to penalties for failing to disclose.
90-Day Filing Extensions for Disclosures
Taxpayers and material advisors get an extra 90 calendar days to file required disclosures: Sec. 1.6011-18(h)(1) gives taxpayers 90 additional days for later-identified transactions, and Sec. 1.6011-18(h)(2) gives material advisors 90 additional days after the normal deadline. The effective date of the regulations is January 14, 2025.
Publicly Traded Partnership Trades Mostly Excluded
The final regulations generally exclude routine public trading in publicly traded partnerships (PTPs) from these reporting rules, but they require reporting when a PTP partner engages in private transfers, redemptions/repurchase agreements, or private placements with related partners that are not otherwise excluded. The rule is part of the final regulations effective January 14, 2025.
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