PLR 200037028: Partnership allowed 30 more days for section 754 election

Plain-English summary

A partnership omitted a section 754 election from its return for the year a partner died. It requested an extension to make the election, which allows adjustments to the basis of partnership property after certain transfers or distributions. The IRS concluded that the partnership satisfied the standards in the section 301.9100 regulations and granted 30 days from the date of the letter to submit a written election statement with a copy of the ruling. The IRS did not decide whether the entity was a partnership for federal tax purposes.

Ruling snapshot

• Question: Could the partnership file its section 754 election after the deadline?
• Outcome: Approved: the election could be filed within 30 days of the ruling letter.
• Key authorities: IRC § 754; Treas. Reg. §§ 1.754-1(b) and 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Index Number: 9100.15-00 Washington, DC 20224

Number: 200037028
Person to Contact:
Release Date: 9/15/2000
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2-PLR-103460-00
Date:
June 13, 2000
Partnership =
A =
Date =
Year 1 =

Dear
:

This responds to your letter dated February 5, 2000, and subsequent correspondence, that you submitted on Partnership’s behalf, requesting an extension of time to make an election under § 754 of the Internal Revenue Code.

On Date, A, a partner in Partnership, died. Partnership’s return for the Year 1 taxable year was filed without a § 754 election.

Section 754 provides that a partnership may elect to adjust the basis of partnership property in the case of a distribution of property or in the case of a transfer of a partnership interest. The election applies with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable year with respect to which such election is filed and all subsequent taxable years.

Section 1.754-1(b) of the Income Tax Regulations provides that an election under § 754 of the Code shall be made in a written statement filed with the partnership return for the taxable year during which the distribution or transfer occurs. For the election to be valid, the return must be filed not later than the time prescribed for filing the return for such taxable year, including extensions thereof.

Section 1.754-1(b) refers to § 1.9100-1 (now § 301.9100 of the Procedure and Administration Regulations) for rules regarding extensions of time for filing elections.

Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Code, except subtitles E, G, H, and I, if the taxpayer demonstrates to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting -2-

the relief will not prejudice the interests of the government. Section 301.9100-1(b) defines the term "regulatory election" as including an election whose deadline is prescribed by notice published in the Internal Revenue Bulletin.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-1(a).

Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government. Section 301.9100- 3(a).

In this case, based on the information submitted and the representations made, we conclude that the requirements of §§ 301.9100-1 through 301.9100-3 have been met. Consequently, Partnership is granted an extension of time for making the § 754 election until thirty days following the date of this letter. The election should be made in a written statement filed with the District Director for association with Partnership's 1997 tax return. A copy of this letter should be attached to the statement filed with the District Director. Enclosed is a copy for that purpose.

Except as specifically set forth above, no opinion is expressed or implied as to the federal income tax consequences of the transaction described above under any other provision of the Code. Specifically, no opinion is expressed concerning whether Partnership is, in fact, a partnership for federal tax purposes.

This ruling is directed only to the taxpayer on whose behalf it was requested. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent. Pursuant to a power of attorney on file in this office, a copy of this letter will be sent to Partnership.
Sincerely yours,
PAUL F. KUGLER
Assistant Chief Counsel
Office of the Assistant Chief Counsel
(Passthroughs & Special Industries)
Enclosures (2):
Copy of this letter
Copy for § 6110 purposes