PLR 200932037: Partnership receives 60-day extension to make a section 754 election

Plain-English summary

The IRS granted a general partnership 60 days to make an election under IRC § 754. A partner had died, and the partnership's return for that year was filed without the election. The partnership represented that it acted reasonably and in good faith and that relief would not prejudice the government. The election must be made in a written statement filed with the applicable service center for association with the partnership's tax return, and a copy of the letter must be attached.

Ruling snapshot

• Question: May the partnership receive more time to make its missed section 754 election?
• Outcome: Approved, a 60-day extension was granted.
• Key authorities: IRC § 754; Treas. Reg. § 1.754-1; Treas. Reg. § 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200932037
Third Party Communication: None
Release Date: 8/7/2009
Date of Communication: Not Applicable
Index Numbers: 754.00-00, 9100.15-00
Person To Contact:
-----------------, ID No. ------------
----------------------------------------------- Telephone Number:
--------------------
---------------------
---------------------
Refer Reply To:
------------------------------
CC:PSI:1
PLR-148878-08
Date:
April 29, 2009

LEGEND

X = ----------------------
---------------------------------------------------

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

A = --------------------------------------
-----------------------------------------------------

D = ---------------------

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

This is in response to a letter dated October 28, 2008, submitted on behalf of X, requesting 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

According to the information submitted, X was formed as a general partnership under the laws of State. A, a partner in X, died on D. X’s tax return for the year in which A died was filed without a § 754 election.

X represents that it has acted reasonably and in good faith, and that granting relief will not prejudice the interests of the government.
PLR-148878-08
2

LAW AND ANALYSIS

Section 754 provides that a partnership may elect to adjust the basis of partnership property when there is a distribution of property or a transfer of a partnership interest. An election under § 754 applies 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.

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, must 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) for filing the return for such taxable year.

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 Internal Revenue Code, except subtitles E, G, H, and I. Section 301-9100-1(b) defines the term "regulatory election" as including an election whose due date is prescribed by a regulation published in the Federal Register.

Sections 301.9100-1 through 301.9100-3 provide the standards that 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 rules for requesting extensions of time for regulatory elections that do not meet the requirements of § 301.9100-2.

Requests for relief under § 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 interest of the government. Section 301-9100-3(a).

CONCLUSION

Based solely on the facts 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 from 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 tax return. A copy of this letter should be attached to the statement filed.
PLR-148878-08
3

Except as expressly provided herein, no opinion is expressed or implied 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 X is a partnership for federal tax purposes.

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 letter is being sent to X’s authorized representative.

Sincerely,

Curt G. Wilson

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

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