PLR 200205025: LLC granted 60 days to make a section 754 election

Plain-English summary

An LLC filed its return without an IRC § 754 election after one of its members died. It asked for more time to elect an adjustment to the basis of partnership property. The IRS found that the requirements for discretionary election relief under the Treasury regulations were satisfied and granted 60 days from the ruling date to file the election statement. The IRS expressly did not decide whether the LLC was a partnership for federal tax purposes.

Ruling snapshot

• Question: May the LLC file a late section 754 election?
• Outcome: Approved: 60 days from the letter date to file the election statement.
• Key authorities: IRC § 754; Treas. Reg. §§ 1.754-1(b), 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200205025
Washington, DC 20224
Release Date: 2/1/2002
Index Number: 754.02-00; 9100.00-00
Person to Contact:

Telephone Number:
(202)622-3050
Refer Reply To:
CC:PSI:B01- PLR-140283-01
Date:
In Re: October 29, 2001

Legend:

LLC =

State 1 =

Date 1 =

Date 2 =

This letter is in response to your request for a written determination, dated July 26, 2001, and submitted on behalf of LLC, requesting an extension of time to make an election under section 754 of the Internal Revenue Code.

Facts

Based on the materials submitted and representations therein, the relevant facts are as follows. LLC is a limited liability company formed under the laws of State 1 on Date 1. X , a member of LLC, died on Date 2. LLC’s partnership return was filed without a section 754 election to adjust the basis of partnership property.

Law and Analysis

Under section 754, a partnership may elect to adjust the basis of partnership property where there is a distribution of property or a transfer of a partnership interest. The election applies to all distributions of property by the partnership and to all transfers 2

of interests in the partnership during the taxable year that the election applies and all subsequent years.

Section 1.754-1(b) of the Income Tax Regulations provides that an election under section 754 is 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 no later than the time for filing for the taxable year, including extensions.

Under section 301.9100-1(c) of the Procedure and Administration Regulations, 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. Section 301.9100-1(b) defines the term “regulatory election” as an election whose deadline is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

Sections 301.9100-2 and 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 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 section 301.9100-2. Requests for relief under section 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.

Conclusions

Based on the information submitted and the representations made, we conclude that the requirements of section 301.9100-1 and 301.9100-3 have been satisfied. As a result, LLC is granted an extension of time of sixty (60) days following the date of this letter to make a section 754 election. The election should be made in a written statement filed with the applicable service center for association with LLC’s return. A copy of this letter should be attached to the statement filed. A copy of this letter is enclosed for that purpose.

Except as specifically set forth above, we express no opinion concerning the federal income tax consequences of the transactions described above under any other provision of the Code. Specifically, we express no opinion as to whether or not LLC is a partnership for federal tax purposes.

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

Pursuant to the power of attorney on file with this office, a copy of this letter is being sent to the taxpayer.

Sincerely,
/s/Paul F. Kugler
Paul F. Kugler
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for section 6100 purposes