Partnership receives 120 days to make a late section 754 election

Plain-English summary

A partnership intended to make an IRC § 754 election for a prior tax year but failed to file it on time. The IRS concluded that the partnership satisfied the standards for discretionary relief under Treas. Reg. § 301.9100-3 and granted 120 days to make the election through the appropriate amended-return or administrative-adjustment filing. The partnership must recreate all property-basis adjustments and basis-recovery deductions that would have applied if the election had been timely, even for closed years. Affected partners must likewise adjust their outside bases, including reductions for deductions that would previously have been allowable. If an administrative adjustment request is required, the partnership must also comply with IRC § 6227(b).

Ruling snapshot

• Question: May a partnership make a late IRC § 754 election for a prior taxable year?
• Outcome: Approved, subject to retroactive basis adjustments
• 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: 202549007
Release Date: 12/5/2025
Index Number: 754.00-00, 754.02-00,
9100.00-00, 9100.15-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
------------------------, ID No. -----------------

Telephone Number:

Refer Reply To:
CC:PT&E:B03
PLR-100780-25

Date:
July 15, 2025

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LEGEND

Company = ---------------------------------------------------
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State = -------------

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

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

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

This letter responds to a letter dated December 20, 2024, submitted on behalf of
Company 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).

FACTS

Company was formed under the laws of State on Date 1, and elected to be
classified as a partnership. Company intended to make a § 754 election for taxable year
ending Date 2. However, Company failed to timely file the election.

PLR-100780-25 2

LAW AND ANALYSIS

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
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) for filing the return for such 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.

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
election. 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 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 interest of the Government.

CONCLUSION

Based solely upon the information submitted and the representations made, we
conclude that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied.
As a result, Company is granted an extension of time of 120 days from the date of this
letter to make a valid election under § 754 effective for Company’s taxable year ending
Date 2. 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,

PLR-100780-25 3

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.

The ruling is contingent on Company’s relevant filing(s) containing adjustments to
the basis of its 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 Company’s
property that would have been allowed 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. 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 adjusted by the greater
of any such deductions allowed or allowable in any prior year had the § 754 election
been timely made.

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

Finally, affected partners of Company must adjust the basis of their interests in
Company to reflect what the basis would have been 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, affected partners of Company must reduce the basis of their interests in
Company in the amount of any additional deductions for the recovery of basis related to
Company’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 the taxpayer is otherwise eligible to make
the election.

The rulings contained in this letter are 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 request for rulings, it is subject to verification on
examination.

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.

PLR-100780-25 4

Sincerely,

Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

By:________
Richard T. Probst
Senior Technician Reviewer, Branch 3
(Passthroughs, Trusts, and Estates)

Enclosures:
Copy of this letter for § 6110 purposes

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