Part I. — Instruction 8865 — Instructions for Form

Acceleration event. An acceleration event is any event that either would reduce the amount of the remaining built-in gain that a U.S. transferor would have recognized under the gain deferral method if the event had not occurred or could defer the recognition of the remaining built-in gain. Acceleration events are applicable on a property-by-property basis. An acceleration event includes the transfer of section 721(c) property by making a contribution of the property itself to another partnership or the contribution of an interest in a section 721(c) partnership to another partnership. When an acceleration event occurs for a section 721(c) property, the U.S. transferor must recognize gain in an amount equal to remaining built-in gain in the property that would have been allocated to the U.S. transferor if the section 721(c) partnership had sold the section 721(c) property immediately before the acceleration event for FMV. Following the event, the gain deferral method no longer applies to that section 721(c) property. See Regulations section 1.721(c)-4 for rules relating to acceleration events.

At any time, a U.S. transferor may affirmatively treat an acceleration event as having occurred (a deemed acceleration event) for a section 721(c) property by both recognizing the remaining built-in gain in that section 721(c) property and satisfying the reporting requirements of the acceleration event. See Regulations section 1.721(c)-4(b)(4).

Column (b). Provide a description of the acceleration event, including the citation in the case of a partial or deemed acceleration event. See Regulations section 1.721(c)-6(b)(3)(iv). Use Part VI if additional space is needed to describe the transaction.

Instructions for Form 8865 (2025) 13

Column (d). Enter the amount of the gain recognized by the U.S. transferor for the section 721(c) property resulting from the acceleration event.

Column (e). Enter the amount that the section 721(c) partnership will increase its basis in the section 721(c) property as a result of the acceleration event. See Regulations sections 1.721(c)-4(c)(2) and 1.721(c)-5(d) in the case of a partial acceleration event.

Column (f). Check the box if there is a partial acceleration event and the U.S. transferor recognizes a partial gain for the section 721(c) property. Certain distributions of other partnership property to a partner that result in an adjustment under section 734 to the section 721(c) property constitute a partial acceleration event requiring that the U.S. transferor recognize gain. If there is a remaining built-in gain in the section 721(c) property immediately after the partial acceleration event, the gain deferral method must continue to apply and the U.S. transferor is required to continue to report the information on Schedule G for that property. See Regulations section 1.721(c)-5(d).