Partnership receives extension for late section 754 election

Plain-English summary

A partnership intended to elect under IRC § 754 to adjust the basis of partnership property but omitted the election from its timely filed return. The IRS concluded that the partnership satisfied the standards for late regulatory-election relief and granted 120 days to file the written election. The partnership must make all section 734(b) and 743(b) basis adjustments that would have applied if the election had been timely, including deductions allowed or allowable in earlier years even when limitation periods have expired. If an administrative adjustment request is required, it must file the appropriate form and account for the adjustments under section 6227(b). Affected partners must also adjust the bases of their partnership interests to the amounts that would have resulted from a timely election.

Ruling snapshot

• Question: May the partnership make a late IRC § 754 election effective for the intended taxable year and later years?
• Outcome: Approved, with 120 days to file and retroactive basis-adjustment conditions
• Key authorities: IRC §§ 734(b), 743(b), 754, 6227(b); Treas. Reg. §§ 1.754-1(b), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202540001 Third Party Communication: None
Release Date: 10/3/2025 Date of Communication: Not Applicable
Index Number: 754.00-00, 9100.00-00,
9100.15-00, 754.02-00 Person To Contact:
--------------------, ID No. -----------------
----------------------- Telephone Number:
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----------------------------- Refer Reply To:
--------------------------- CC:PT&E:B01
--------------------------- PLR-100280-25
Date:
June 26, 2025

                                             LEGEND

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

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

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

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

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

This letter responds to a letter dated December 21, 2024, 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 to file an election under § 754 of the Internal Revenue Code (Code).

                                             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. X intended to file a § 754 election to adjust the basis of X's property for the
taxable year ending Date 2, but X inadvertently failed to file the election with its
otherwise timely filed return for the taxable year ending Date 2.
PLR-100280-25 2

                             LAW AND ANALYSIS

Section 754 provides, in part, that if a partnership files an election, in accordance with
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) 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, must 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 no 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 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) provides that the term “regulatory election” includes an election
whose due date is prescribed by a regulation published in the Federal Register.

Section 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 interests of the Government.

                                 CONCLUSION

Based solely 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, X
is granted an extension of time of 120 days from the date of this letter to make an
election under § 754 effective for X's taxable year ending Date 2 and thereafter. The
election should be made in a written statement filed with the appropriate service center
PLR-100280-25 3

either (1) to be associated with X's return for its taxable year ended Year, or (2)
accompanying Form 1065-X, Amended Return or Administrative Adjustment Request
(AAR), or Form 8082, Notice of Inconsistent Treatment or AAR, and for any related
filings as instructed in Form 1065-X or Form 8082, as appropriate. A copy of this letter
should be attached to the relevant filing.

This ruling is contingent on X's relevant filings containing adjustments to the basis of X's
properties 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 recovery of basis related to X's property that would have been
allowable 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. 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 to properly amend a partnership tax return, then this ruling
is contingent on X filing Form 1065-X or Form 8082 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 the basis would be if the § 754 election had been timely made, regardless of
whether the statutory period of limitations on assessment or filing a claim for refund has
expired for any year subject to this grant of late relief. Specifically, the 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 for the specific ruling above, we express or imply no opinion concerning the
federal tax consequences of the facts of this case under any other provision of the
Code. In addition, § 301.9100-1(a) provides that the granting of an extension of time for
making an election is not a determination that a taxpayer is otherwise eligible to make
the election.

The ruling contained in this letter is based upon information and representations
submitted by the taxpayer and accompanied by a penalties 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.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the
Code provides that it may not be used or cited as precedent.
PLR-100280-25 4

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

                                           Sincerely,



                                           Jeffrey Erickson
                                           Associate Chief Counsel
                                           (Passthroughs, Trusts, and Estates)




                                           By: _______________________________
                                           Joy C. Spies
                                           Senior Technician Reviewer, Branch 1
                                           Office of Associate Chief Counsel
                                           (Passthroughs, Trusts, and Estates)

Enclosure
Copy for § 6110 purposes

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