IRS Instruction 7217 – IRS Form, Instructions, Pubs 2026)

IRS Instruction 7217 – If you are a partner in a partnership and received a distribution of property (other than cash or marketable securities treated as money), you likely need to file Form 7217. This new IRS requirement, effective for tax years beginning in 2024, standardizes reporting of your basis in distributed property under IRC Section 732.

The December 2024 version of the form and instructions applies to 2024 and later tax years. This guide summarizes the official IRS instructions, who must file, when and how to file, line-by-line details, and practical tips. Always refer to the latest official IRS resources for your specific situation.

What Is Form 7217 and Why Was It Introduced?

Form 7217, titled Partner’s Report of Property Distributed by a Partnership, requires partners to report:

  • The partnership’s predistribution basis in the property
  • Fair market value (FMV)
  • Any special basis adjustments (e.g., under Sections 732(d), 734(b), or 743(b))
  • The partner’s final basis in the property after applying Section 732 rules

Purpose: It replaces informal statements previously required when a partner’s basis in distributed property differed from the partnership’s basis. The form helps the IRS verify proper application of Section 732 basis rules in both non-liquidating and liquidating distributions.

The IRS introduced this requirement as part of broader efforts to improve transparency in partnership reporting (similar to tax basis capital reporting and Schedules K-2/K-3) and to gather data on potential “basis shifting” transactions, particularly among related parties. These transactions can shift basis from nondepreciable or long-lived assets to assets with faster depreciation or imminent sales.

Who Must File Form 7217?

You must file a separate Form 7217 for each date you actually received property subject to Section 732, even if the distributions are part of the same overall transaction.

Required for:

  • Non-liquidating distributions of property
  • Liquidating (complete) distributions of property

Not required for:

  • Distributions consisting only of money or marketable securities treated as money under Section 731(c)
  • Payments for services under Section 707(a)(1)
  • Disguised sales under Section 707(a)(2)(B)

The partnership provides key data on your Schedule K-1 (Form 1065), Box 19, Code C (and possibly a Section 732(d) statement). You remain responsible for calculating your outside basis.

When and Where to File?

Attach Form 7217 to your individual, corporate, or other tax return for the year you received the distribution. File by the due date of your return, including extensions.

Use the December 2024 version for tax years beginning in 2024 or later. Download the latest form and instructions at IRS.gov/Form7217.

Step-by-Step Guide to Completing Form 7217

General Information

Enter:

  • Your name and TIN (SSN or EIN)
  • Partnership’s name and EIN
  • Distribution date

Part I – Aggregate Basis of Distributed Property on Distribution Date

This section summarizes the overall transaction.

  • Line 1: Check if the distribution was in complete liquidation of your partnership interest.
  • Line 2: Check if any part was treated as a sale or exchange under Section 751(b) (hot assets). Attach a statement calculating any Section 751(b) gain/loss.
  • Line 3: Partnership’s aggregate basis in distributed property (from K-1 Code C). Must equal total of Part II, Column (b).
  • Line 4: Your outside basis in the partnership interest immediately before the distribution (your calculation; not on K-1).
  • Line 5a: Cash received (including deemed distributions under Section 752(b); from K-1 Code A).
  • Line 5b: FMV of marketable securities (from K-1 Code A).
  • Lines 6–7: Calculate and report any gain recognized under Section 731(a) if cash exceeds basis.
  • Line 8: Indicate if U.S. tax is required on Line 7 gain.
  • Line 9: Outside basis reduced by cash (but not below zero). Include any Section 737 gain.
  • Line 10: Aggregate basis to allocate to non-money property:
    • Non-liquidating → Smaller of Line 3 or Line 9
    • Liquidating → Line 9
      This must equal total of Part II, Column (e).

Part II – Allocation of Basis of Distributed Property

List each item of distributed property (use additional copies or attachments as needed).

Columns:

  • (a) Description (include asset class code from Pub. 946 Appendix B if applicable)
  • (b) Partnership’s basis immediately before distribution (includes adjustments under 732(d), 734(b), 743(b))
  • (c) Check boxes for applicable special adjustments:
    • (i) 732(d)
    • (ii) 732(f) stock (corporate partners only, specific 80% ownership rules)
    • (iii) 734(b)
    • (iv) 743(b)
  • (d) FMV (from K-1 Code C)
  • (e) Your basis after Section 732 (apply 732(a)(2) limitation for non-liquidating or 732(b) for liquidating, then allocate per Section 732(c))

Totals (Line B): Column (b) must = Part I Line 3; Column (e) must = Part I Line 10.

Key Section 732 Rules (summarized from instructions):

  • Non-liquidating (732(a)(2) limitation): Partner’s basis in property is limited to remaining outside basis after cash. Allocate any reduction among properties per Section 732(c).
  • Liquidating (732(b)): Aggregate basis equals outside basis reduced by cash. Allocate per Section 732(c) priority: unrealized receivables/inventory first at partnership basis, then other property (adjust for appreciation/depreciation and FMV).

Example 1 (Non-liquidating – from IRS instructions): Partner with $10,000 outside basis receives $4,000 cash + property with $8,000 partnership basis → Partner’s basis in property is limited to $6,000.

Example 2 (Liquidating – from IRS instructions): Detailed allocation among inventory and other assets shows step-by-step application of Section 732(c) priorities.

Practical Tips and Common Pitfalls

  • Gather information early — Rely on your Schedule K-1, but calculate your own outside basis using partnership contributions, income, losses, and prior distributions.
  • Multiple distributions — File a separate Form 7217 for each distribution date.
  • Asset class codes — Required when applicable; see Pub. 946.
  • Section 751(b) and 737 — These can trigger gain recognition—consult a tax professional.
  • No new computations — The form mainly requires you to document the Section 732 calculations you should already be performing.
  • Recordkeeping — Retain Form 7217 and supporting worksheets with your tax records.

Partners in investment partnerships or those receiving in-kind distributions of securities should pay special attention, as these are now explicitly reportable.

Where to Get the Official Documents?

  • Form 7217 & Instructions (December 2024) → https://www.irs.gov/pub/irs-pdf/i7217.pdf (user-provided link) and the form at IRS.gov
  • About Form 7217 → IRS.gov/forms-pubs/about-form-7217
  • Partner’s Instructions for Schedule K-1 (Form 1065) → For outside basis guidance

Final Thoughts

Form 7217 adds transparency to partnership property distributions but does not change the underlying tax rules under Section 732. Most compliant partners will find it straightforward once they have the K-1 data and their outside basis.

Tax rules are complex, and errors in basis calculations can lead to audits or adjustments—especially with the IRS’s increased focus on partnerships. Consult a qualified tax advisor or CPA for your specific situation, particularly if you have related-party partners, special basis adjustments, or complex distributions.

Stay updated: Check IRS.gov/Form7217 for any future developments. This guide is based on the official December 2024 instructions and is for informational purposes only.

Last updated for tax years beginning in 2024/2025 filings (as of 2026).