Beginning in tax year 2024, Form 7217 is filed by any partner to report the basis of property distributed to the partner from a partnership, including any basis adjustments as required by section 732(a)(2) or (b).
At present, TaxSlayer Pro does not support Form 7217.
How does a partner know they need to file Form 7217?
The fair market value of property distributed is generally reported to the partner on Schedule K-1 (Form 1065) on line 19 with code C "Other Property". It could also be reported on a section 732(d) statement attached to Schedule K-1.
Prior to 2024, a partner who received this kind of distribution was required to attach a statement to their return if the basis of the property required a section 732(a)(2) or 732(b) basis adjustment. Form 7217, however, must be filed for every property distribution irrespective of whether a basis adjustment is required or not.
What kinds of distributions don't require Form 7217?
Form 7217 is not filed for the following kinds of distributions:
- Distributions of money or marketable securities treated as money.
- Payments to a partner for services performed other than in their capacity as a partner under IRC Section 707(a)(1).
- Transfers that are treated as disguised sales under IRC Section 707(a)(2)(B).
Form 7217 is filed for each date the partner received property from a partnership. Thus, if a partner received property on more than one date, even if part of the same transaction, they will file multiple forms, one for each date.
What information is reported on Form 7217?
Form 7217 consists of two parts.
- Part I aggregates the information reported in Part II.
- Part II lists for the various kinds of property received the partnership's basis in the property before distribution, indication that the basis includes an adjustment under certain code sections, the fair market value of the property (as reported on Schedule K-1), and the partner's basis in the distributed property after application of section 732.
The taxpayer's basis, as determined under section 732, will vary depending on whether the distribution is a liquidating or a non-liquidating distribution.
Additional Information:
IRS: Instructions for Form 7217, Partner’s Report of Property Distributed by a Partnership
IRS New Release IR-2024-249, Sept. 30, 2024, regarding the draft form and instructions released