PLR 200906026: A partnership received more time to make a section 754 election

Plain-English summary

A limited partnership sought a section 754 election after one of its partners died. The partnership relied on a tax advisor to make the election, but the advisor inadvertently missed the deadline. A section 754 election permits partnership-property basis adjustments for distributions and transfers of partnership interests and normally must accompany a timely partnership return for the relevant year. The IRS concluded that the partnership satisfied the discretionary relief standards and granted 60 days to make the election effective for the requested year. The IRS did not rule on the entity's partnership status or the fair market value of the deceased partner's interest.

Ruling snapshot

• Question: Could the partnership receive more time to make a section 754 election after its advisor missed the deadline?
• Outcome: Approved: the partnership received 60 days to file the election for the requested year.
• Key authorities: IRC §§ 734(b), 743(b), 754; Treas. Reg. §§ 1.754-1(b), 1.6031-1(e), 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200906026
Third Party Communication: None
Release Date: 2/6/2009
Date of Communication: Not Applicable
Index Number: 754.00-00, 9100.00-00,
9100.31-00
Person To Contact:
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Refer Reply To:
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CC:PSI:B02
PLR-129305-08
Date:
October 28, 2008

X = -------------------------------------------------------------------------------------------------------
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A = ------------------

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

D2 = -------------------------------------------------------------------------------------------------------
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Year = -------

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

This responds to a letter dated May 22, 2008, submitted on behalf of X by its authorized representative, requesting a ruling that X be granted an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations to make an election under § 754 of the Internal Revenue Code.

The information submitted states that X was formed as a limited partnership on D1. A, a partner of X, died on D2. X relied on its tax advisor to make an election under § 754 for Year. However, the tax adviser inadvertently failed to timely make an election under § 754 for Year.

Section 754 provides that if a partnership files an election, in accordance with the regulations prescribed by the Secretary, the basis of the partnership property is adjusted, in the case of a transfer of a partnership interest, in the manner provided in § 743. Such an election shall apply 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 the election was filed and all subsequent taxable years.
PLR-129305-08
2

Section 1.754-1(b) of the Income Tax Regulations provides that an election under § 754 to adjust the basis of partnership property under §§ 734(b) and 743(b), with respect to a distribution of property to a partner or a transfer of an interest in a partnership, 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 by § 1.6031-1(e) (including extensions thereof) for filing the return for that taxable year.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than 6 months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code except subtitles E, G, H. and I. Section 301.9100-1(b) defines the term “regulatory election” as an election whose due date 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.

Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will be granted when the taxpayer provides evidence to establish 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.

Based solely on 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 60 days from the date of this letter to make an election under § 754, effective for Year, with the appropriate service center. A copy of this letter should be attached to the § 754 election. A copy is enclosed for that purpose.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Internal Revenue Code and the regulations thereunder. Specifically, no opinion is expressed or implied concerning whether X was or is a partnership for tax purposes or the fair market value of A’s interest in X on D2.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
PLR-129305-08
3

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to X's authorized representative.

Sincerely,

Curtis G. Wilson
Deputy Associate Chief Counsel
(Passthroughs & Special Industries)

Enclosures: (2)
Copy of this letter
Copy for § 6110 purposes