9100-3 relief granting 120 days to make a late section 754 election so a partnership can adjust the basis of its property after a partner's death

Plain-English summary

A partnership had a partner die, an event that (with a section 754
election in place) lets the partnership step up the inside basis of its
assets to match the value the deceased partner's successor now has in the
partnership interest. The partnership meant to make that election but
inadvertently missed the deadline. It asked the IRS for relief under the
"9100" regulations, which allow extra time to make a late election when
the taxpayer acted reasonably and in good faith and relief will not harm
the government. The IRS granted 120 days from the date of the letter to
make the section 754 election effective for the year the partner died.
The relief comes with strings: the partnership must actually make the
corresponding basis adjustments (under sections 734(b) and 743(b)),
including catching up any depreciation or basis-recovery deductions that
would have been allowed, even for years now closed by the statute of
limitations, and the partners must adjust the basis of their own
partnership interests accordingly. The IRS did not decide whether the
partnership was otherwise eligible to make the election.

Ruling snapshot

• Question: Should the partnership get an extension under § 301.9100-3 to make a late section 754 election for the year a partner died?
• Outcome: Approved (120 days from the date of the letter, subject to making the required basis adjustments)
• Key authorities: IRC § 754; IRC §§ 734(b), 743(b); Treas. Reg. § 1.754-1(b); Treas. Reg. §§ 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202601010
Release Date: 1/2/2026
Index Number: 9100.15-00, 754.00-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
----------------------, ID No. -----------------
Telephone Number:
Refer Reply To: CC:PT&E:B03
PLR-110892-25
Date: October 01, 2025

Legend

X = ---
A = ---
State = ---
Date 1 = ---
Date 2 = ---
Date 3 = ---
Date 4 = ---

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

    This letter responds to a letter dated May 22, 2025, submitted on behalf of X 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

    X was formed under the laws of State on Date 1, and was treated as a partnership for federal tax purposes. A, a partner in X, died on Date 2. X inadvertently failed to make a § 754 election for its taxable year ended Date 3.

                                       LAW

   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 shall apply 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, shall 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 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 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.

   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.

                                  CONCLUSION

   Based solely on 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 an election under § 754 effective for X'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, for X's taxable year ended Date 4 to be associated with X's return for its taxable year ended Date 3. A copy of this letter should be attached to the relevant filing.

    This ruling is contingent on X's relevant filing(s) 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 limitations on assessment or filing a claim for refund has expired for any year subject to this grant of late relief. Any deductions for 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 such deductions allowed or allowable in any prior year had the § 754 election been timely made.

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

    Additionally, the 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 the taxpayer is otherwise eligible to make the election.

   The ruling contained in this letter is based on 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 ruling request, 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 your authorized representative.

                                                          Sincerely,

                                                          Associate Chief Counsel
                                                          (Passthroughs, Trusts, and Estates)

                                                          Richard T. Probst

                                                By:       _____________________________
                                                          Richard T. Probst
                                                          Senior Technician Reviewer, Branch 3
                                                          Office of the Associate Chief Counsel
                                                          (Passthroughs, Trusts, and Estates)

Enclosure
Copy for § 6110 purposes

cc: ---