120 days granted to make a late Section 754 basis-adjustment election, via an amended partnership return

Plain-English summary

An LLC taxed as a partnership meant to make a Section 754 election, which
lets a partnership adjust the tax basis of its property when interests
change hands or property is distributed, but it missed the deadline. The
election must be filed with the partnership return for the year of the
transfer. The LLC asked the IRS for relief under Treasury Regulation
§ 301.9100-3. The IRS found the taxpayer acted reasonably and in good faith
and that late relief would not prejudice the government, so it granted 120
days to make the election for the year in question. Because that year is
already filed, the partnership makes the late election by filing an amended
return (Form 1065-X or Form 8082, an administrative adjustment request
under Section 6227) and accounting for the required adjustments. As with
other late Section 754 relief, the partnership and its partners must make
all the basis adjustments they would have if the election had been timely,
even for years now closed by the statute of limitations.

Ruling snapshot

• Question: May a partnership that missed the Section 754 election
  deadline get an extension to make it via an amended return?
• Outcome: Approved (120-day extension granted, subject to conditions
  and an administrative adjustment request)
• Key authorities: IRC § 754; Treas. Reg. § 1.754-1(b); IRC § 6227;
  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: 202614021                                    Third Party Communication: None
 Release Date: 4/3/2026                               Date of Communication: Not Applicable
 Index Numbers: 754.00-00, 754.02-00,
               9100.00-00, 9100.15-00                 Person To Contact:
                                                      ----------------------------, ID No. --------------
 -------------------------------                      -----------------
 -----------------------------                        Telephone Number:
 --------------------------------------               ---------------------
                                                      Refer Reply To:
 ---------------------------                          CC:PTE:B03
                                                      PLR-114554-25
                                                      Date:
                                                      January 12, 2026




LEGEND

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

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

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

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



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

      This letter responds to a letter dated June 27, 2025, submitted on behalf of X,
requesting an extension of time under § 301.9100-3 of the Procedure and
Administration Regulations for X to file an election under § 754 of the Internal Revenue
Code (Code).

                                              FACTS

       X, a State limited liability company that was classified as a partnership for federal
tax purposes, intended to make a § 754 election for its taxable year ended Date 1.
However, X failed to timely file an election under § 754 with its partnership return for its
taxable year ended Date 1.
PLR-114554-25                                 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
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, 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 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) defines the term “regulatory
election” as including 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 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 for its taxable year ended Date 1. 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
PLR-114554-25                                  3

in Form 1065-X or Form 8082, as appropriate, for X’s taxable year ended Date 2 for
association with X’s return its taxable year ended Date 1. 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 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 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, affected 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, affected 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 this 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 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-114554-25                                                4

      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)



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



Enclosure:
      Copy of this letter for § 6110 purposes


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