Partnership may revoke election out of bonus depreciation

Plain-English summary

A partnership elected out of 100% additional first-year depreciation for its 5-year, 7-year, and 15-year qualified property after relying on its return preparer. A later preparer reviewing the return would have advised against that election and recommended requesting consent to revoke it. The IRS found that the partnership acted reasonably and in good faith and that revocation would not prejudice the government. It granted 60 days to amend the original return and any later return affected by the changed depreciation deductions, including all related income and tax adjustments. The ruling does not decide whether the property was otherwise eligible for bonus depreciation or correctly classified.

Ruling snapshot

• Question: May the partnership revoke its election not to claim additional first-year depreciation for the affected property classes?
• Outcome: Approved, with 60 days to file amended returns
• Key authorities: IRC § 168(k); Treas. Reg. § 1.168(k)-2(f)(5)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 202521007
Third Party Communication: None
Release Date: 5/23/2025
Date of Communication: Not Applicable
Index Number: 9100.00-00, 9100.04-00
Person To Contact:
----------------------------------------- -----------------------, ID No. -----------------
----------------------------- Telephone Number:
------------------------------------ --------------------
------------------------- Refer Reply To:
CC:ITA:B07
PLR-115089-24
Date:
February 21, 2025

Re: Request to Revoke the Election Under § 168(k)(7) Not to Deduct the Additional
First Year Depreciation

Legend

Taxpayer = -----------------------------------------------------------
Taxable Year 1 = ------------------------------------------------------------------
--
Taxable Year 2 = ------------------------------------------------------------------
--
X = -----------------------------------
Preparer 1 = -----------------------
Preparer 2 = -------------------
Firm 1 = ----------------------------------
Firm 2 = ----------------------------------------------------------
State = -------------

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

    This letter responds to a letter dated August 8, 2024, and supplemental

information, submitted on behalf of Taxpayer by Taxpayer’s authorized representative,
requesting the consent of the Commissioner of Internal Revenue to revoke Taxpayer’s
election under § 168(k)(7) of the Internal Revenue Code not to deduct any additional
first year depreciation that was made on its federal tax return for Taxable Year 1. This
letter ruling is being issued electronically in accordance with section 7.02(5) of Rev.
Proc. 2024-1, 2024-1 I.R.B. 1, 34.

   Unless provided otherwise, all references in this letter ruling to § 168(k) are

treated as a reference to § 168(k) as in effect after amendment by Public Law 115-97,

PLR-115089-24 2

131 Stat. 2054 (Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act.
Further, all references in this letter ruling to § 1.168(k)-2 of the Income Tax Regulations
are treated as a reference to the final § 1.168(k)-2 regulations published in the Federal
Register on November 10, 2020 (85 FR 71734).

                                      FACTS

   Taxpayer is a limited liability company treated as a partnership for federal income

tax purposes. Taxpayer files a Form 1065, U.S. Return on Partnership Income, on a
calendar year basis (Form 1065). Taxpayer’s overall method of accounting is an
accrual method. Taxpayer is engaged in the business of X. Taxpayer timely filed its
Form 1065 (including extensions) for Taxable Year 1.

  Taxpayer engaged Preparer 1 of Firm 1 to prepare and file its Form 1065 for

Taxable Year 1.

    Taxpayer placed in service qualified property in the 5-year class, 7-year class,

and 15-year class in Taxable Year 1. However, Taxpayer elected out of the additional
first year depreciation under § 168(k)(7) for all eligible classes of qualified property on
its Form 1065 for Taxable Year 1, a year for which the applicable percentage for
qualified property is 100% under § 168(k)(6)(A)(i).

 Preparer 1 is a licensed certified public accountant in the state of State.

Taxpayer, who is not a tax professional, relied on Preparer 1’s advice.

    Taxpayer subsequently engaged Preparer 2 of Firm 2 to prepare its federal

income tax return for Taxable Year 2. In reviewing Taxpayer’s Form 1065 for Taxable
Year 1 with respect to § 168(k), Preparer 2, if they had been asked to provide advice
with respect to § 168(k), would have advised Taxpayer not to elect out of the additional
first year depreciation under § 168(k)(7) for Taxable Year 1. Preparer 2 advised
Taxpayer to file this request for relief under § 1.168(k)-2(f)(5). Accordingly, Taxpayer is
requesting permission to revoke its § 168(k)(7) election that Taxpayer made for Taxable
Year 1.

                              RULING REQUESTED

  Accordingly, Taxpayer requests consent to revoke its § 168(k)(7) election not to

deduct additional first year depreciation under § 168(k)(1) for all classes of qualified
property that were placed in service during Taxable Year 1.

                               LAW AND ANALYSIS

   Section 168(k)(1) allows, for the taxable year in which qualified property is placed

in service, an additional first year depreciation deduction equal to the applicable
percentage of the adjusted basis of that qualified property.

PLR-115089-24 3

    For qualified property acquired by a taxpayer after September 27, 2017,

§ 168(k)(6)(A)(i) and (B)(i) provide that the applicable percentage is 100 percent for
qualified property placed in service by the taxpayer after September 27, 2017, and
before January 1, 2023 (or before January 1, 2024 for qualified property described in
§ 168(k)(2)(B) or (C)).

    Section 168(k)(7) provides that a taxpayer may elect not to deduct the additional

first year depreciation for any class of property that is qualified property placed in
service during the taxable year. Section 1.168(k)-2(f)(1)(i) provides that if this
§ 168(k)(7) election is made, the election applies to all qualified property that is in the
same class of property and placed in service in the same taxable year, and no
additional first year depreciation is allowable for the property placed in service during
the taxable year in the class of property, except as provided in § 1.743-1(j)(4)(i)(B)(1).
The term “class of property” is defined in § 1.168(k)-2(f)(1)(ii) as meaning, for purposes
of this § 168(k)(7) election, each class of property described in § 168(e) (for example, 5-
year property).

  Section 1.168(k)-2(f)(5) provides that an election under § 168(k)(7), once made,

may generally be revoked only by filing a request for a private letter ruling and obtaining
the Commissioner of Internal Revenue’s written consent to revoke the election. The
Commissioner may grant a request to revoke the election if the taxpayer acted
reasonably and in good faith, and the revocation will not prejudice the interests of the
Government.

                                  CONCLUSION

   Based solely on the facts and representations submitted, we conclude that the

requirements of § 1.168(k)-2(f)(5) have been satisfied. Accordingly, Taxpayer is
granted 60 calendar days from the date of this letter to revoke its election not to deduct
any additional first year depreciation for all classes of qualified property that were
placed in service by Taxpayer during Taxable Year 1. This revocation must be made by
Taxpayer: (i) filing an amended federal income tax return for Taxable Year 1 with a
written statement indicating that Taxpayer is revoking its election under § 168(k)(7) not
to deduct additional first year depreciation under § 168(k)(1) for all classes of qualified
property that were placed in service during Taxable Year 1; and (ii) filing an amended
federal income tax return for Taxable Year 2 if a depreciation deduction was allowed or
allowable in such year with respect to any qualified property that was placed in service
during Taxable Year 1. Each amended federal income tax return must include the
adjustment to tax liability, the adjustment to taxable income for the amount of
depreciation allowed or allowable for that taxable year, and any collateral adjustments
to taxable income or tax liability.

   A copy of this letter ruling must be attached to each amended federal income tax

return. A taxpayer filing its federal return electronically may satisfy this requirement by

PLR-115089-24 4

attaching a statement on their return that provides the date and control number of the
letter ruling.

   Except as expressly set forth above, we express no opinion concerning the tax

consequences of the facts described above under any other provision of the Code
(including other subsections of § 168). Specifically, no opinion is expressed or implied
concerning whether: (1) any item of depreciable property placed in service by Taxpayer
during Taxable Year 1 is eligible for the additional first year depreciation under § 168(k);
(2) any item of such property is qualified property as defined in § 168(k)(2); and (3)
Taxpayer’s classification of any item of depreciable property under § 168(e) is correct.

  The rulings contained in this letter are based upon facts and representations

submitted by Taxpayer with accompanying penalty of perjury statements executed by
an appropriate party. While this office has not verified all of the information submitted in
support of the request for ruling, it is subject to verification on examination.

  This letter ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)

provides that it may not be used or cited as precedent.

  In accordance with the power of attorney on file with this office, we are sending a

copy of this letter ruling to Taxpayer’s authorized representative. We are also sending a
copy of this letter ruling to the appropriate IRS operating division official.

                                      Sincerely,


                                      JAMES F. LIECHTY
                                      Tax Law Specialist, Branch 7
                                      Office of Associate Chief Counsel
                                      (Income Tax and Accounting)

Enclosures (2): Copy of this letter
Copy for section 6110 purposes

PLR-115089-24 5

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

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