Partnership received 120 more days to make a Section 754 election after a partner’s death

Plain-English summary

Two individuals held partnership interests through grantor trusts, and one individual died during the year at issue. The partnership inadvertently failed to include an IRC § 754 election with its return for that year. The IRS concluded that the partnership satisfied the standards for late-election relief and granted 120 days to file the election using the appropriate Form 1065-X or Form 8082 procedure. Relief requires the partnership to reconstruct all §§ 734(b) and 743(b) property-basis adjustments and related basis-recovery deductions as though the election had been timely, including for closed years. If an administrative adjustment request is required, the partnership must make the corresponding IRC § 6227(b) adjustments. Affected partners must also adjust their outside bases to the amounts that would have applied under a timely election.

Ruling snapshot

• Question: Should the partnership receive additional time to make an IRC § 754 election for the year of a partner’s death?
• Outcome: Approved
• Key authorities: IRC §§ 734(b), 743(b), 754, 6227(b); Treas. Reg. §§ 1.754-1(b), 1.6031(a)-1(e), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202514001 Third Party Communication: None
Release Date: 4/4/2025 Date of Communication: Not Applicable
Index Number: 9100.15-00
Person To Contact:
-------------------------------- --------------------, ID No. -----------------
-------------------------- Telephone Number:
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------------------------ Refer Reply To:
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PLR-113085-24
Date:
December 31, 2024

                                                LEGEND

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

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

B = ------------------

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

Date 1 = -----------------------

Date 2 = -----------------------

Date 3 = --------------------------

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

This letter responds to a letter dated July 18, 2024, and subsequent correspondence
submitted on behalf of X by its authorized representatives, 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”).
PLR-113085-24 2

                                      FACTS

According to the information submitted, X was formed as a limited liability company
under the laws of State on Date 1 and is classified as a partnership for federal tax
purposes. A and B held interests in X through their respective grantor trusts. On Date
2, A died. However, X inadvertently failed to file a § 754 election to adjust the basis of
X’s property with its return for the taxable year ended Date 3, the year of A’s death.

                              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 distribution of property, in the manner provided in § 734 and, in the case of
a transfer of a partnership interest by sale or exchange or upon the death of a partner,
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(a)-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 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 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.

Sections 301.9100-1 through 301.9100-3 provide the standards that 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 rules for requesting extensions of time for regulatory elections that
do not meet the requirements of § 301.9100-2.

Under § 301.9100-3, a request for extension of time will be granted when the taxpayer
provides 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 interest of the Government.
PLR-113085-24 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 effective for its taxable year ended Date 3. The election should be made in a
written statement filed with the appropriate service center accompanying Form 1065-X,
Amended Return or Administrative Adjustment Request (AAR), or Form 8082, Notice of
Inconsistent Treatment or AAR, and any related filing instructions as instructed in Form
1065-X or Form 8082, as appropriate. A copy of this letter should be attached to the
relevant filings.

As a condition of this ruling, to the extent that X has not already done so, X must adjust
the basis of its properties on its relevant filings to reflect any § 734(b) or § 743(b)
adjustments that would have been made if the § 754 election had been timely made.
These basis adjustments must reflect any additional deductions for the recovery of
basis that would have been allowable had the election been timely made, regardless of
whether the statutory period of limitation on assessment or filing a claim for refund has
expired for any year subject to this grant of late relief. Any deductions for the recovery
of basis allowable for an open year are to be computed based on the remaining useful
life or recovery period and using property basis as adjusted by the greater of any such
deductions allowed or allowable in any prior year had the § 754 election been timely
made.

If X is required to file an AAR in order to properly amend a partnership tax return, then
this ruling is also contingent on such partnership filing Form 1065-X or Form 8082,
respectively, and taking into account the adjustments as required by § 6227(b).

Additionally, affected partners of X must adjust the basis of their interests in X to reflect
what that basis would be if the § 754 election had been timely made, regardless of
whether the statutory period of limitation on assessment or filing a claim for refund has
expired for any year subject to this grant of late relief. Specifically, affected partners of
X must reduce the basis of their interests in X in the amount of any additional
deductions for the recovery of basis related to X’s property that would have been
allowable if the § 754 election had been timely made.

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.

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 requested ruling, it is subject to verification on examination.
PLR-113085-24 4

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 representatives.

                                                     Sincerely,


                                                     Holly Porter
                                                     Associate Chief Counsel
                                                     (Passthroughs & Special Industries)



                                                     By:___________/s/_______________
                                                     Jennifer N. Keeney
                                                     Senior Counsel, Branch 1
                                                     Office of the Associate Chief Counsel
                                                     (Passthroughs & Special Industries)

Enclosure:
Copy of letter for § 6110 purposes

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