Penalty Relief for Certain Partnership Exchanges with “Hot Assets”

Section 751 property is unrealized receivables and inventory items of partnerships—“hot assets.” A sale or exchange of these hot assets results in ordinary income. When it relates to a partnership interest, the partnership with hot assets must provide information on Form 8303 to a transferor and transferee that are parties to a sale or exchange by the later of January 31 of the year after the exchange occurred or 30 days after the partnership receives notice of the exchange. Tax pros expressed concerns that they wouldn’t have all the information needed to furnish Form 8303 by January 31. Last year, the IRS granted penalty relief for filings related to 2023 due by January 31, 2024. Now it has granted relief for 2024 exchanges for which the form would be due by January 31, 2025. #IdeaoftheDay

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