PLR 1201014: IRS grants partnership 120 days to make a section 754 election

Plain-English summary

The IRS granted a state limited partnership 120 days to make a late election under IRC section 754. The partnership had timely filed its tax return but inadvertently omitted the 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. The election was to be made in a written statement filed with the applicable service center and attached to the ruling.

Ruling snapshot

• Question: Could the partnership receive more time to make an omitted section 754 election?
• Outcome: Approved
• Key authorities: IRC §§ 734, 743, and 754; 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: 201201014 Third Party Communication: None
Release Date: 1/6/2012 Date of Communication: Not Applicable
Index Numbers: 754.00-00, 754.02-00,
9100.15-00 Person To Contact:
-------------------, ID No. -------------
------------------------------------ Telephone Number:
----------------------------------------------------------- --------------------
----------------------------------- Refer Reply To:
--------------------------- CC:PSI:03
PLR-130660-11
Date: September 15, 2011

                                                LEGEND

Partnership = -------------------------------------

State = --------

Year = -------

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

  This letter responds to a letter dated April 13, 2011, 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 Partnership is a State limited partnership.

Partnership’s tax 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

   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.

   Section 301.9100-1(c) provides that the Commissioner may grant a reasonable

extension of time under §§ 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.

   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)) 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,
Partnership 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
for association with Partnership’s Year tax return. A copy of this letter should be
attached to the statement filed.

PLR-130660-11 3

   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
Partnership 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 your authorized representative.

                               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