PLR 200921013: Partnership received more time to make a section 754 election

Plain-English summary

A general partnership timely filed its return for a year in which one partner died but inadvertently omitted its section 754 election. The partnership submitted evidence that it acted reasonably and in good faith and that relief would not prejudice the government. The IRS concluded that the regulatory requirements for an extension were satisfied. It granted the partnership 60 days from the ruling date to make the section 754 election effective for the relevant year. The election had to be filed in a written statement with the appropriate service center and include a copy of the ruling.

Ruling snapshot

• Question: Could the partnership receive an extension to make its missed section 754 basis-adjustment election?
• Outcome: Approved: the partnership received 60 days to file the election effective for the requested year.
• Key authorities: IRC §§ 734, 743, 754; Treas. Reg. §§ 1.754-1, 301.9100-1, 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200921013
Third Party Communication: None
Release Date: 5/22/2009
Date of Communication: Not Applicable
Person To Contact:
Index Number: 754.02-00, 754.00-00,
---------------------, ID No. -------------
Telephone Number:
9100.00-00, 9100.15-00
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Refer Reply To:
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PLR-138071-08
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Date:
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February 04, 2009

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

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

Year 1 = -------

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

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

This responds to a letter dated August 27, 2008, submitted on behalf of X, requesting an extension of time pursuant to § 301.9100-3 of the Procedure and Administration Regulations for X to make an election under § 754 of the Internal Revenue Code.

X is a general partnership organized under the laws of State. A was a Partner of X until her death on D1 of Year 1. X’s partnership return was timely filed for Year 1. However, X inadvertently failed to timely file a § 754 election. X has submitted evidence to establish that it acted reasonably and in good faith and that granting the requested relief will not prejudice the interests of the government.

Section 754 provides, in part, that if a partnership files an election, in accordance with the regulations prescribed by the Secretary, the basis of partnership property is adjusted, in the case of a distribution of property, in the manner provided in § 734 and, 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
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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.

Section 1.754-1(b) of the Income Tax Regulations provides, in part, that an election under § 754 and section § 1.754-1(b) 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 under the rules set forth in §§ 301.9100-2 and 301.9100-3 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) provides, in part, that the term “regulatory election” means 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.

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 301.9100-3 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 for 60 days following the date of this letter to make an election under § 754 effective Year 1. The election should be made in a written statement filed 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 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 requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
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In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.

Sincerely,

/s

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

Enclosures (2)

cc: