Partnership received 120 days to make a late section 754 election

Plain-English summary

A general partnership failed to file a section 754 election for the year in which one of its partners died. The election allows partnership-property basis adjustments after certain distributions or transfers of partnership interests. The partnership represented that the omission was inadvertent, that it acted reasonably and in good faith, and that late relief would not prejudice the government. It also filed the affected and later returns consistently with the election having been made. The IRS granted 120 days to file the written election statement with the service center, either for association with the original return or with Form 8082 and any related filings. The ruling did not determine whether the partnership otherwise qualified to make the election.

Ruling snapshot

• Question: May the partnership receive extra time to make a section 754 basis-adjustment election for the year a partner died?
• Outcome: Approved, with 120 days to file the election
• Key authorities: IRC §§ 734, 743, and 754; Treas. Reg. §§ 1.754-1(b)(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: 202348001
Third Party Communication: None
Release Date: 12/1/2023
Date of Communication: Not Applicable
Index Numbers: 754.00-00, 754.02-00,
9100.00-00, 9100.15-00
Person To Contact:
--------------------, ID No. -----------------
--------------
Telephone Number:
----------------------------------------- ---------------------
------------------------------
Refer Reply To:
-------------------------------------
CC:PSI:B03
------------------------------
PLR-104432-23
Date:
August 29, 2023

LEGEND:

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

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

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

Year = ----- ---

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

This letter responds to a letter dated February 20, 2023, 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 for X to file an election under § 754 of the Internal Revenue Code (“Code”).

FACTS

The information submitted states that X was formed on Date as a general partnership under the laws of State and is classified as a partnership for federal tax purposes. In Year, one of X’s partners died. A § 754 election to adjust the basis of partnership property was inadvertently not filed for Year taxable year. X represents that it has acted reasonably and in good faith, and that granting relief to make a § 754 election will not prejudice the interests of the Government.
PLR-104432-23
2

X represents that it has filed returns for its Year taxable year and subsequent taxable years in a manner consistent with the § 754 election having been made.

LAW

Section 754 provides, in part, 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 distribution of property, in the manner provided in § 734, and, in the case of a transfer of a partnership interest, in the manner provided in § 743. Such an election 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)(1) of the Income Tax Regulations provides, in part, 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(a)-1(e) (including extensions thereof) for filing the return for the 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 Code except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term "regulatory election" as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

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 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.

Under § 301.9100-3, a request for relief 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 (1) the taxpayer acted reasonably and in good faith, and (2) the grant of relief will not prejudice the interests of the Government.
PLR-104432-23
3

CONCLUSION

Based solely upon 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 120 days from the date of this letter to make a § 754 election for its Year taxable year. The election should be made in a written statement filed with the applicable service center either (1) to be associated with X’s Year partnership tax return, or (2) accompanying Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), and any related filings as instructed in Form 8082, as appropriate. A copy of this letter should be attached to the relevant filing.

Except as specifically ruled upon above, we express or imply no opinion concerning the tax consequences of any facts discussed or referenced in this letter. In addition,
§ 301.9100-1(a) provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election.

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

The ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the ruling request, it is subject to verification on examination.

In accordance with a power of attorney on file with this office, we are sending a copy of this letter ruling to your authorized representative.

Sincerely,

Associate Chief Counsel
(Passthroughs & Special Industries)

By:_____
Richard T. Probst
Senior Technician Reviewer, Branch 3
Office of the Associate Chief Counsel
(Passthroughs & Special Industries)
PLR-104432-23
4

Enclosure:
Copy of this letter for § 6110 purposes

cc: -----------------------------
-------------------------------------------
-----------------------------------
---------------------------

--------------------------------
----------------------------------
-----------------------------------
---------------------------

----------------------------------
---------------------------------------------
--------------------------------------------