§ 9100 extension to make a late § 754 election to adjust partnership basis

Plain-English summary

A partnership can elect under IRC § 754 to adjust the tax basis of its assets when a partner's interest changes hands or when property is distributed, so the inside basis better matches what the partners paid. The election is made by attaching a statement to the timely-filed partnership return. Here, an LLC taxed as a partnership meant to make the § 754 election but did not file it on time. It asked the IRS for an extension under the § 301.9100-3 relief rules. The IRS agreed, finding the taxpayer acted reasonably and in good faith and that relief would not prejudice the government, and granted a 120-day extension to make the election on an amended return (Form 1065-X or Form 8082). The relief is contingent: the partnership and its affected partners must go back and adjust their basis, and any recovery-of-basis deductions, as if the election had been made on time, even for years otherwise closed by the statute of limitations.

Ruling snapshot

• Question: May a partnership that missed the deadline get an extension of time to make a § 754 election?
• Outcome: Approved (120-day extension granted under Treas. Reg. §§ 301.9100-1 and 301.9100-3).
• 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: 202626004
Release Date: 6/26/2026
Index Number: 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:PTE:B03
PLR-116592-25
Date:
April 02, 2026

LEGEND

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

State = ----------
Date 1 = --------------------------
Date 2 = --------------------------

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

  This letter responds to a letter dated September 12, 2025, and subsequent correspondence, 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.

                               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 in Form 1065-X or Form 8082, as appropriate, for X's taxable year ended Date 2 for association with X's return for 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.

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

                                            Sincerely,

                                            Associate Chief Counsel
                                            (Passthroughs, Trusts, and Estates)


                                       By: ________________________
                                          Robert D. Alinsky
                                          Branch Chief, Branch 3
                                          Office of the Associate Chief Counsel
                                          (Passthroughs, Trusts, and Estates)

Enclosure:
Copy of this letter for § 6110 purposes

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