120 days granted to make a late Section 754 basis-adjustment election after a partner's death

Plain-English summary

An LLC treated as a partnership for tax purposes had a partner die during
the year. When a partner dies (or a partnership interest otherwise
transfers), a Section 754 election lets the partnership adjust the tax
basis of its property so the new owner's inside basis lines up with what
they effectively paid. That election has to be filed with the partnership
return for the year of the transfer. This partnership missed the deadline.
It asked the IRS for relief under Treasury Regulation § 301.9100-3, which
lets the IRS grant more time for a missed regulatory election if the
taxpayer acted reasonably and in good faith and letting them elect late
would not hurt the government. The IRS agreed and gave the partnership 120
days from the date of the letter to make the election, effective for the
year in question and afterward. The relief is conditional: the partnership
and its partners must go back and make all the basis adjustments (and take
only the deductions) they would have had if the election had been timely,
even for years now closed by the statute of limitations.

Ruling snapshot

• Question: May a partnership that inadvertently missed the deadline
  for a Section 754 election get an extension of time to make it?
• Outcome: Approved (120-day extension granted, subject to conditions)
• Key authorities: IRC § 754; 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: 202614026                                             Third Party Communication: None
 Release Date: 4/3/2026                                        Date of Communication: Not Applicable
 Index Number: 754.02-00, 9100.00-00,
               9100.15-00                                      Person To Contact:
                                                               ------------------------, ID No. -----------------
 ---------------------------------------------                 Telephone Number:
 -------------------------------------------------             ---------------------
 -------------------------                                     Refer Reply To:
 --------------------------                                    CC:PT&E:01
                                                               PLR-116560-25
                                                               Date:
                                                               January 13, 2026




                                                     LEGEND


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

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

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

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

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

 Year        = -------




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

This letter responds to a letter dated September 9, 2025, submitted on behalf of X by
X’s authorized representative, 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.
PLR-116560-25                                2

                                         FACTS

According to the information submitted, X is a limited liability company formed on Date 1
and organized under the laws of State. X is treated as a partnership for federal income
tax purposes. A, a partner in X, died on Date 2. X inadvertently failed to make a timely
election under § 754 for the year of A's death.

                                  LAW AND ANALYSIS

Section 754 provides, in part, that if a partnership files an election, in accordance with
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, 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, 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 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-116560-25                                 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 an election under § 754 effective for its Year taxable year and thereafter. The
election should be made in a written statement filed with the appropriate service center
for association with X’s return for its Year taxable year. A copy of this letter should be
attached to the § 754 election.

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.

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 expressly set forth above, no opinion is expressed or implied concerning the
federal tax consequences of the facts discussed above under any other provision of the
Internal Revenue 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
Internal Revenue Code provides that it may not be used or cited as precedent.
PLR-116560-25                                  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 representative.

                                       Sincerely,

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


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



Enclosure: Copy for § 6110 purposes


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