Late § 754 election allowed for an LLC taxed as a partnership

Plain-English summary

An LLC taxed as a partnership meant to make a § 754 election but did not file it on time with its return. A § 754 election lets a partnership adjust the tax basis of its assets when interests change hands or property is distributed, so the partners' inside basis matches economic reality. The LLC asked the IRS for extra time to file the missed election. The IRS granted a 120-day extension under Treas. Reg. § 301.9100-3, which allows late elections when the taxpayer acted reasonably and in good faith and the government is not prejudiced. As usual, the relief is conditional: the LLC and its partners must actually make the resulting § 734(b) and § 743(b) basis adjustments (including any depreciation or basis recovery) as if the election had been timely, even for years the limitations period would otherwise close, and must use Form 1065-X or Form 8082 if an administrative adjustment request is needed.

Ruling snapshot

• Question: May an LLC taxed as a partnership get more time to file a § 754 election it inadvertently missed?
• Outcome: approved (120-day extension granted)
• Key authorities: IRC § 754; Treas. Reg. § 1.754-1(b); Treas. Reg. §§ 301.9100-1 through 301.9100-3; IRC §§ 734(b), 743(b), 6227(b)

Full text (IRS public release)

 Internal Revenue Service                                      Department of the Treasury
                                                               Washington, DC 20224

 Number: 202610008                                             Third Party Communication: None
 Release Date: 3/6/2026                                        Date of Communication: Not Applicable
 Index Number: 743.00-00, 754.00-00,
               9100.15-00                                      Person To Contact:
                                                               -----------------------, ID No. -----------------
 ------------------------------------------------              Telephone Number:
 --------------------------------------------                  --------------------
 ---------------------------------------------------           Refer Reply To:
 ------------------------                                      CC:PT&E:B01
                                                               PLR-111934-25
                                                               Date:
                                                               December 10, 2025




Legend

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

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

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

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


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

      This letter responds to a letter dated June 11, 2025, 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 is a limited liability company organized
under the laws of State on Date 1. X intended to make a § 754 election for its taxable
year ending Date 2. However, X represents that it inadvertently failed to file a timely
§ 754 election with its partnership return for its taxable year ending Date 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
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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 by sale or exchange or upon the death
of a partner, 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 Internal Revenue 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 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
a § 754 election for its taxable year ending Date 2 and thereafter. The election should
be made in a written statement filed with the appropriate service center either (1) to be
associated with X's partnership tax return for its taxable year ending Date 2, or
(2) accompanying Form 8082, Notice of Inconsistent Treatment or Administrative
PLR-111934-25                                  3

Adjustment Request (AAR), and any related filings as instructed in Form 8082, as
appropriate. A copy of this letter should be attached to the relevant filing(s).

         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 the 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 in order 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, the partners of X must adjust the basis of their interests in X 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 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 as specifically ruled upon 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 who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.
PLR-111934-25                                         4

         In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to X’s authorized representatives.


                                                   Sincerely,

                                                   Jeffrey A. Van Hove
                                                   Acting Associate Chief Counsel
                                                   (Passthroughs, Trusts, and Estates)




                                               By: ____________________________
                                                   Caroline E. Hay
                                                   Senior Technician Reviewer, Branch 1
                                                   Office of the Associate Chief Counsel
                                                   (Passthroughs, Trusts, and Estates)


Enclosure:

        Copy of this letter for section 6110 purposes

 cc:
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