PLR 201031006: IRS granted an extension to make a section 754 election

Plain-English summary

The IRS granted a partnership an extension of time to make a valid IRC § 754 election. The partnership had transferred partnership interests but filed its return without a valid election to adjust the basis of partnership property. The IRS found that the requirements for relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were satisfied and granted 60 days from the letter date to make the election for the specified year and later years. The election had to be made in a written statement filed with the appropriate service center and attached to the ruling letter.

Ruling snapshot

• Question: Could the partnership receive additional time to make a valid section 754 election?
• Outcome: Approved
• Key authorities: IRC § 754; Treas. Reg. §§ 1.754-1(b) and 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201031006
Third Party Communication: None
Release Date: 8/6/2010
Date of Communication: Not Applicable
Index Number: 9100.00-00, 754.00-00
Person To Contact:
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CC:PSI:B02
PLR-108035-10

Date:
April 21, 2010

Legend

X = -----------------------------------------------------------------
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State = -------------

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

Year = -------

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

This responds to a letter dated February 16, 2010 submitted on behalf of X requesting an extension of time under § 301.9100-1(c) of the Procedure and Administration Regulations to elect to file a valid election under § 754 of the Internal Revenue Code (“Code”).

FACTS

The information submitted states that on D1, members of X transferred partnership interests to other members of X. X’s tax return for Year was filed without a valid § 754 election.

LAW AND ANALYSIS

Section 754 provides that if a partnership files an election, in accordance with regulations prescribed by the Secretary, the basis of partnership property shall be adjusted, in the case of a distribution of property, in the manner provided in § 734 and,
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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 such 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, 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 such taxable year. The statement shall (i) set forth the name and address of the partnership making the election, (ii) be signed by any one of the partners, and (iii) contain a declaration that the partnership elects under § 754 to apply the provisions of § 734(b) and § 743(b).

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 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 a regulatory election to include an election whose due date is prescribed by a regulation published in the Federal Register.

Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections. 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.

Section 301.9100-3(a) provides that requests for relief subject to § 301.9100-3 will be granted when the taxpayer provides the evidence (including affidavits described in
§ 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government.

CONCLUSION

Based 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 an election under § 754, effective for Year and thereafter. The election should be made in a written statement filed with the appropriate service center for association with X's Year return. A copy of this letter should be attached to the § 754 election.
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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. Specifically, we express or imply no opinion as to whether or not X is a partnership for federal tax purposes.

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

In accordance with the power of attorney on file with this office, a copy of this letter will be sent to the authorized representative of X.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By:________
Melissa C. Liquerman, Branch Chief
Branch 2
Office of Chief Counsel

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