PLR 201122015: IRS grants more time for a partnership basis election

Plain-English summary

The IRS granted a partnership an extension of time to make an election under IRC § 754. The partnership had timely filed its return, but the election to adjust the basis of partnership property was inadvertently omitted after a member's death. The IRS found that the requirements for relief under Treas. Reg. §§ 301.9100-1 and 301.9100-3 were satisfied. It granted 120 days from the ruling date to file the written election with the applicable service center, effective for the stated tax year and later years.

Ruling snapshot

• Question: May the partnership make a late § 754 election to adjust the basis of partnership property?
• Outcome: Approved.
• Key authorities: IRC §§ 301, 734, 743, 754, 9100, 6110; Treas. Reg. §§ 1.754-1, 1.6031-1, 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201122015
Third Party Communication: None
Release Date: 6/3/2011
Date of Communication: Not Applicable
Person To Contact:
Index Numbers: 754.00-00, 754.02-00,
-------------------, ID No. -------------
Telephone Number:
9100.15-00
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Refer Reply To:
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CC:PSI:03
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PLR-132683-10
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Date:
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January 18, 2011

LEGEND

Company = ----------------
----------------------------------------------------------

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

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

Date = ----------------

Year = -------

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

This letter responds to a letter dated June 25, 2010, and subsequent correspondence 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 (Code).

FACTS

The information submitted states that Company is a State limited liability company that is treated as a partnership for federal tax purposes. A, a member of Company, died on Date of Year. Company’s partnership return for Year was timely filed, but a § 754 election to adjust the basis of partnership property was inadvertently not filed with the return.

LAW AND ANALYSIS
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Section 754 provides 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 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.

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.

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 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.

Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election.

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

Section 301.9100-3 provides 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 the evidence (including affidavits described in § 301.9100-3(e)) 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, Company is granted an extension of time of 120 days from 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 applicable service center
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for association with Company’s Year return. A copy of this letter should be attached to the § 754 election.

Except as specifically set forth above, we express or imply no opinion concerning the federal 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 Company 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.

Pursuant to a power of attorney on file with this office, we are sending a copy of this ruling to Company’s authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By: _______ Mary Beth Carchia
Senior Technician Reviewer, Branch 3
Office of Associate Chief Counsel
(Passthroughs & Special Industries)

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

cc: