PLR 200123049: Partnership received more time to revoke its section 754 election

Plain-English summary

A limited partnership wanted to revoke an existing IRC § 754 election under a special rule effective December 15, 1999, but its representative failed to tell it about that option before the filing deadline. The IRS concluded that the partnership met the standards for discretionary filing relief. It gave the partnership 60 days after the ruling to file the required revocation statement and attach a copy of the letter. The ruling addresses the deadline and procedure for revocation, without deciding other tax consequences.

Ruling snapshot

• Question: Could the partnership receive more time to revoke its § 754 election under the special regulatory rule?
• Outcome: Approved
• Key authorities: IRC § 754; Treas. Reg. §§ 1.754-1(c)(2), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200123049
Washington, DC 20224
Release Date: 6/8/2001
Index Number: 9100.15-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:PSI:Br.1-PLR-101910-01
Date:
March 12, 2001

Legend:

LP
=

State =

D1
=

This letter responds to your December 26, 2000 request for a private letter ruling, along with subsequent correspondence, submitted on behalf of LP, requesting a time extension under § 301.9100-3 of the Procedure and Administration Regulations.

FACTS

According to the information submitted, LP is a State limited partnership that previously made an election to adjust the basis of partnership property pursuant to § 754 of the Internal Revenue Code. LP desired to revoke its § 754 election. However, LP’s representative failed to inform LP that LP could choose to revoke its § 754 election effective December 15, 1999 pursuant to § 1.754-1(c)(2) of the Income Tax Regulations. Thus LP failed to revoke its § 754 election when filing its return for the year ending D1.

LAW AND ANALYSIS

Section 1.754-1(c)(1) provides the general rule that a partnership having an election in effect under § 754 may revoke that election only with the approval of the director for the internal revenue district in which the partnership return is required to be filed.

Section 1.754-1(c)(2) provides that notwithstanding § 1.754-1(c)(1), any partnership having an election in effect under § 754 for its taxable year that includes December 15, 1999 may revoke such election effective for transfers or distributions occurring on or after December 15, 1999, by attaching a statement to the partnership’s return for such year. For the revocation to be valid, the statement must be filed not 2 PLR-101910-01

later that the time prescribed by § 1.6031(a)-1(e) (including extensions thereof) for filing the return for such taxable year.

Section 301.9100-1(c) gives the Commissioner discretion to grant reasonable extensions of time to make regulatory elections under the rules of §§ 301.9100-2 and 301.9100-3. Under § 301.9100-1(b), a regulatory election includes an election whose due date is prescribed by a regulation published in the Federal Register or a notice published in the Internal Revenue Bulletin.

Section 301.9100-3 sets forth the standards which the Commissioner uses to determine whether to grant a discretionary time extension. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence proving to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the Government.

CONCLUSION

Based solely on the facts submitted and the representations made, we conclude that LP has satisfied the requirements of §§ 301.9100-1 and 301.9100-3. As a result, LP is granted an extension of time under the provisions of § 1.754-1(c)(2) to revoke its election under § 754, effective December 15, 1999, until 60 days following the date of this letter. LP should revoke its election by filing the statement described in § 1.754- 1(c)(2). A copy of this letter should be attached to that statement.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to the taxpayer and to the taxpayer’s second authorized representative.

Sincerely,
Paul F. Kugler
Associate Chief Counsel
(Passthroughs and Special Industries)
Enclosures (2)
Copy of this letter
Copy for section 6110 purposes