If you received noncash property from a partnership, such as real estate, equipment, or inventory, than the IRS may require you to file Form 7217 – Partner’s Report of Property Distributed by a Partnership. This form documents the tax basis taken in property that has been distributed to you under IRC §732. The basis will be important for depreciation, as well as calculating gain or loss if the property is sold.

The form is filed by the partner that receives the property. IRS instructions state the form is used to report the basis in either nonliquidating or liquidating distribution, including any required basis adjustments under IRC §732(a)(2) or §732(b).

Typically, you file one Form 7217 for each partnership and each date you received the property. If one partnership distributes multiple assets on the same date, these can be reported on the same form. If property is distributed on different dates, you will need a separate form for each date.

It is important to note the filing requirement can still apply, even if there is no immediate tax due and the distribution does not result in a basis adjustment.

The form will be attached to your tax return for the year you received the property and is due when the tax return is, including extensions.

When is it required?

Generally, it is required when an individual receives noncash property from a partnership in a distribution that is covered by IRC §732.

Common examples of property this can include:

• Real estate, such as land or a building
• Equipment, vehicles, or other business property
• Nonpublicly traded securities or ownership interests, depending on how assets are classified, it is important to classify because some marketable securities may be treated as cash

When is it NOT required?

It is not required for distributions consisting only of cash, marketable securities treated as money, payments for services outside of your capacity as a partner, or transfers treated as disguised sales.

Please contact your Polk advisor to discuss if you have received or plan to receive a property distribution from a partnership.

Polk & Associates

Large enough to serve a diverse clientele, yet small enough to maintain a hands-on approach, we are committed to maintaining the highest accounting and ethical standards with continuous education, extensive research resources, and excellent quality control.

Polk and Associates is a member of the Michigan Association of Certified Public Accountants, and the American Institute of Certified Public Accountants. The firm participates in the AICPA Peer Review Program, and has always received the highest level of award for its audit practice and quality control.