PLR 201114011: IRS grants 120 days to make a late section 754 election

Plain-English summary

The IRS granted a limited liability company 120 days to make a late election under IRC § 754 for the tax year in which a member died. The company had inadvertently missed the deadline for the election. The IRS concluded that the requirements for late-election relief were satisfied and made the extension available for that tax year and later years. The ruling also required a written statement filed with the appropriate service center and a copy of the ruling attached to the election. It did not decide whether the company was a partnership for federal tax purposes or address other tax consequences.

Ruling snapshot

• Question: Could the company receive additional time to make a § 754 election after a member's death?
• Outcome: Approved, 120-day extension granted.
• Key authorities: IRC §§ 754 and 6110; Treas. Reg. §§ 1.754-1 and 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201114011
Third Party Communication: None
Release Date: 4/8/2011
Date of Communication: Not Applicable
Index Number: 754.02-00, 9100.15-00
Person To Contact:
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Telephone Number:
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-------------------------------------- Refer Reply To:
CC:PSI:B01
PLR-134182-10
Date:
December 15, 2010

Legend

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

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

D2 = -------------------

Year = -------

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

This letter responds to a letter dated July 28, 2010, and subsequent correspondence, submitted on behalf of X by its authorized representative, 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

X was formed as a limited liability company under State law on D1. A, a member of X, died on D2. X inadvertently failed to timely make an election under § 754 for the year of A’s death.
PLR-134182-10
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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 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 interest in the partnership during the taxable year with respect to which the election was filed and all subsequent tax 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 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) provides that the term “regulatory election” includes 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 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 120 days following the date of this letter to make an election under § 754 effective for its Year taxable year and thereafter. The election should be made in a written statement filed with the appropriate service center.
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A copy of this letter should be attached to the § 754 election. A copy is enclosed for that purpose.

Except as expressly set forth above, no opinion is expressed or implied concerning the federal tax consequences of the facts discussed 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.

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.

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,

Associate Chief Counsel
(Passthroughs & Special Industries)

By:Barbara J. Campbell
Barbara J. Campbell
Senior Technician Reviewer, Branch 1
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: