120-day extension to make a late section 754 basis-adjustment election

Plain-English summary

A limited liability limited partnership had a partner die during a tax year. When a partnership interest transfers (including on a partner's death), a section 754 election lets the partnership adjust the basis of its assets so the new owner's inside basis matches the value of the interest, which can produce future depreciation or loss deductions. The election must be filed with the partnership return for the year of the transfer, but this partnership inadvertently missed it. It asked the IRS for relief under the "9100" regulations (Treas. Reg. §§ 301.9100-1 and 301.9100-3), which let the IRS grant extra time to make a missed election if the taxpayer acted reasonably and in good faith and relief will not prejudice the government. The IRS granted 120 days from the date of the letter to make the election, on the condition that the partnership and its partners retroactively adjust their bases as if the election had been timely. The letter notes that granting the extension is not itself a ruling that the partnership was eligible to make the election.

Ruling snapshot

• Question: Should the partnership get an extension of time to file a missed section 754 election for a prior year?
• Outcome: Approved (120-day extension granted)
• Key authorities: IRC § 754 (with §§ 734(b), 743(b)); Treas. Reg. §§ 301.9100-1, 301.9100-3, 1.754-1(b)(1)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202552002 Third Party Communication: None
Release Date: 12/26/2025 Date of Communication: Not Applicable
Index Number: 754.00-00, 754.02-00,
9100.00-00, 9100.15-00 Person To Contact:
-------------------------, ID No. -----------------
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------------------------------------------------------------ Telephone Number:
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---------------------------------- Refer Reply To:
-------------------------- CC:PT&E:B03
----------------------------- PLR-107505-25
------------------------------------ Date:
September 30, 2025

LEGEND

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

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

Year = -------

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

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

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

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

  This letter responds to a letter dated March 13, 2025, and subsequent

correspondence, submitted on behalf of X by its authorized representative, requesting
an extension of time under §§ 301.9100-1 and 301.9100-3 of the Procedure and
Administration Regulations for X to file an election under § 754 of the Internal Revenue
Code (Code).
PLR-107505-25 2

                                      FACTS
   According to the information submitted, X was formed as a limited liability limited

partnership under the laws of State in Year and is classified as a partnership for federal
tax purposes. On Date 1, A, a partner in X, died. X inadvertently failed to make a § 754
election with its partnership return for its taxable year ended Date 2.

                                  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, 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)(1) 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.

   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 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 interests of the Government.
PLR-107505-25 3

                                  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, X is granted an extension of time of 120 days from the date of this letter to
make a § 754 election for its taxable year ended Date 2. The election should be made in
a written statement filed with the appropriate service center for association with X's
return for its taxable year ended Date 2. A copy of this letter should be attached to the
statement filed.

    This ruling is contingent on X adjusting 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 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.

    Finally, affected partner(s) 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 affected
partner(s) 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 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.
PLR-107505-25 4

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

copy of this letter to X's authorized representative.

                                               Sincerely,

                                               Associate Chief Counsel
                                               (Passthroughs, Trusts, and Estates)



                                          By: _________/s/_______________
                                             Mary Beth Carchia
                                             Senior Technician Reviewer, Branch 3
                                             Office of the Associate Chief Counsel
                                             (Passthroughs, Trusts, and Estates)

Enclosure:
Copy of this letter for § 6110 purposes

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