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

Plain-English summary

A state limited partnership meant to make a § 754 election but missed the
deadline. A § 754 election lets a partnership adjust the tax basis of its
assets when a partner's interest transfers (here, a partner had died) or when
property is distributed, so the incoming or continuing partners get basis that
matches economic reality. The partnership asked the IRS for "9100 relief," a
discretionary extension to make a late election under Treas. Reg. §§ 301.9100-1
and 301.9100-3. The IRS found the partnership acted reasonably and in good
faith and that granting relief would not prejudice the government, so it gave
the partnership 120 days from the date of the letter to make the election. The
relief comes with conditions: the partnership and its partners must go back and
compute basis adjustments as if the election had been timely, even for closed
years. This is a routine but valuable fix for a partnership that would otherwise
lose the basis step-up tied to a partner's death.

Ruling snapshot

• Question: May the partnership get an extension of time to make a late § 754 election?
• Outcome: Approved (120-day extension granted)
• Key authorities: IRC § 754 (with §§ 734(b), 743(b)); Treas. Reg. § 1.754-1(b)(1); Treas. Reg. §§ 301.9100-1 and 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202624007
Release Date: 6/12/2026
Index Numbers: 754.00-00, 754.02-00, 9100.00-00, 9100.15-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
--------------------, ID No. -----------------
Telephone Number:

Refer Reply To:
CC:PT&E:B03
PLR-120159-25
Date:
March 11, 2026

LEGEND

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

State = ---------

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

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

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

Date 3 = --------------------------

Date 4 = --------------------------

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

  This letter responds to a letter dated November 10, 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).

                                       FACTS

  The information submitted states that X, a State limited partnership formed on Date 1, is classified as a partnership for federal tax purposes. A, a partner in X, died on Date 2. However, X inadvertently failed to make a § 754 election for its taxable year ended Date 3.

                                        LAW

    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)(1) 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, 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 not later than the time prescribed by § 1.6031(a)-1(e) (including extensions thereof) for filing the return for the 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 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) defines the term "regulatory election" as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice, or announcement published in the Internal Revenue Bulletin.

   Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will use to determine whether to grant an extension of time to make an election. Section 301.9100-2 provides the rules governing automatic extensions of time for making certain elections. Section 301.9100-3 provides the standards the Commissioner will use to determine whether to grant an extension 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 upon 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 one hundred-twenty (120) days from the date of this letter to make a § 754 election for its 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 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.

    Additionally, affected partner(s) 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 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 as specifically ruled upon above, we express or imply no opinion concerning the tax consequences of any facts discussed or referenced in this letter. 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.

  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.

   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.

  In accordance with a power of attorney on file with this office, we are sending a copy of this letter ruling to your authorized representative.

                                                   Sincerely,

                                                    Associate Chief Counsel
                                                    (Passthroughs, Trusts, and Estates)

                                                 By: _____________________________
                                                    Brian J. Barrett
                                                    Senior Technician Reviewer, Branch 3
                                                    Office of Associate Chief Counsel
                                                    (Passthroughs, Trusts, and Estates)

Enclosure:
Copy of this letter for § 6110 purposes

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