PLR 200509017: Partnership receives 60 days to make an omitted basis adjustment election

Plain-English summary

A partnership timely filed its return after a partner died but inadvertently omitted a section 754 election to adjust the basis of partnership property. The IRS found that the requirements for discretionary election relief under the section 301.9100 regulations were met. It granted the partnership 60 days from the date of the letter to file the written election with the service center, along 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 omitted section 754 election after the deadline?
• Outcome: Approved: a 60 day extension was granted.
• 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
Washington, DC 20224
Number: 200509017
Third Party Communication: None
Release Date: 3/4/05
Date of Communication: Not Applicable
Index Number: 754.00-00, 9100.00-00,
9100.15-00
Person To Contact:
-----------------------, ID No. ------------- Telephone Number:
---------------------
Refer Reply To:
CC:PSI:B01
PLR-154636-04
Date:
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November 12, 2004
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Legend

X = -----------------------
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Y = -------------------------

State = ----------

D1 = ----------------------------

Dear ---------------:

This letter responds to a request dated October 15, 2004, on behalf of X by its authorized representative, for an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to file an election under § 754 of the Internal Revenue Code.

FACTS

Based upon the material submitted and representations within, X is a partnership formed in accordance with the laws of State. Y, a partner in X, died on D1. X’s partnership return was timely filed (including extensions), but a § 754 election to adjust the basis of partnership property was inadvertently not filed with the return.

PLR-154636-04
2

LAW AND ANALYSIS

Pursuant to § 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 of interests in the partnership during the taxable year with respect to which the election was filed and all subsequent years.

Section 1.754-1(b) of the Income Tax Regulations provides that an election under § 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 § 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. Section 301.9100-1(b) defines the term “regulatory election as including an election whose deadline is prescribed by a regulations published in the Federal Register.

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 for time for making elections that do not meet the requirements of section 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence 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).

CONCLUSION

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

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 X is a partnership for federal tax purposes.

PLR-154636-04
3

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

Pursuant to the Power of Attorney on file with this office, a copy of this ruling will be sent to the taxpayer’s representative.

Sincerely,

/s/ Heather C. Maloy
Heather C. Maloy
Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures (2)
Copy of this letter
Copy for section 6110 purposes