9100 extension to make a late section 754 partnership basis-adjustment election (754)

Plain-English summary

A limited liability company taxed as a partnership had a new buyer acquire interests in it. The partnership wanted to make a section 754 election, which lets a partnership adjust the tax basis of its assets when interests change hands or property is distributed, so the incoming partner's inside basis matches what it paid. The election must be filed with the partnership's timely return for the year of the transfer, and the partnership missed that deadline. It asked the IRS for more time under Treas. Reg. § 301.9100-3, which forgives a missed regulatory election when the taxpayer acted reasonably and in good faith and relief will not prejudice the government. The IRS found the standard met and granted a 120-day extension to make the § 754 election, conditioned on the partnership and its affected partners making the basis adjustments (under §§ 734(b) and 743(b)) that would have applied had the election been timely, even for years otherwise closed by the statute of limitations. The relief does not decide whether the partnership is otherwise eligible to make the election.

Ruling snapshot

• Question: Should the partnership get an extension of time under Treas. Reg. § 301.9100-3 to make a late § 754 election?
• Outcome: Approved (120-day extension granted, subject to conforming basis adjustments)
• Key authorities: IRC § 754 (and §§ 734(b), 743(b)); Treas. Reg. § 1.754-1(b); Treas. Reg. §§ 301.9100-1 through 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202550022
Release Date: 12/12/2025
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-102056-25

Date: July 22, 2025

LEGEND

Company = --------------------------------------
State = -------------
Date 1 = ------------------
Date 2 = ------------------
Date 3 = ------------------
Buyer = -----------------

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

This letter responds to a letter dated January 31, 2025, submitted on behalf of Company's 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

According to the information submitted, Company is a State limited liability company formed on Date 1 and classified as a partnership for federal tax purposes. On Date 2, Buyer acquired interests in Company. Company intended to make a § 754 election for Company's taxable year ending Date 3. However, Company failed to timely file the election.

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 the election was filed and all subsequent taxable years.

Section 1.754-1(b) 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, 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 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) 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 the Commissioner will use to determine whether to grant an extension of time to make a regulatory election. Section 301.9100-2 provides automatic extensions of time for making certain elections. Section 301.9100-3 provides extensions of time for making elections that do not meet the requirements of § 301.9100-2.

Section 301.9100-3 provides that requests for relief 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 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, Company is granted an extension of time of one hundred-twenty (120) days from the date of this letter to make a valid election under § 754 effective for Company's 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 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 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 the recovery of basis related to Company'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. Additionally, this ruling is contingent on Company filing Form 1065-X or Form 8082 and taking into account the adjustments as required by § 6227(b).

Additionally, the affected partners of Company must adjust the basis of their interests in Company 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, the affected partners 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 described above under any other provisions of the Code and regulations thereunder. 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 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.

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 a power of attorney on file with this office, we are sending a copy of this letter to Company's authorized representatives.

Sincerely,

Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

By: Elizabeth V. Zanet
Senior Technician Reviewer, Branch 3
Office of Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

Enclosure:
Copy of this letter for § 6110 purposes

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