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

Plain-English summary

A partnership can elect under § 754 to adjust the tax basis of its assets when a
partnership interest is transferred or when it distributes property. The adjustment
lets the affected partner's share of the inside basis match the value they effectively
paid, which often produces extra depreciation deductions or reduces later gain. The
election must be filed with the partnership's timely return for the year of the
triggering event. Here a limited partnership had interests in it sold during the year
but inadvertently failed to file the § 754 election with that year's return, and it
asked the IRS for relief under Treas. Reg. § 301.9100-3. Finding the partnership acted
reasonably and in good faith and that relief would not prejudice the government, the
IRS granted a 120-day extension to make the election through an amended return or
administrative adjustment request. The relief is conditioned on the partnership and
its affected partners actually making the corresponding basis adjustments (under
§§ 734(b) and 743(b)) as if the election had been timely, even for years now closed by
the statute of limitations. The IRS noted the extension is not a determination that the
election is otherwise valid.

Ruling snapshot

• Question: Should a partnership that missed the deadline get an extension to make a § 754 election for the year interests in it were sold?
• Outcome: Approved (120-day extension granted under § 301.9100-3, subject to conforming basis adjustments)
• Key authorities: IRC § 754; Treas. Reg. § 1.754-1(b); IRC §§ 734(b), 743(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: 202629001                                                Third Party Communication: None
    Release Date: 7/17/2026                                          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:PT&E:B03
                                                                     PLR-111400-25
                                                                     Date:
                                                                     April 09, 2026




LEGEND

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

State             =        --------

Year              =        ------

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

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


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


       This letter responds to a letter dated May 6, 2025, and subsequent
 correspondence, submitted on behalf of X by its authorized representatives, 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

        According to the information submitted, X was formed as a limited partnership
 under the laws of State in Year and is properly treated as a partnership for federal tax
 purposes. On Date 1, interests in X were sold. X inadvertently failed to timely file a
 § 754 election with its partnership return for its taxable year ended Date 2. X
 represents that it has acted reasonably and in good faith, and that granting relief will
PLR-111400-25                                 2


not prejudice the interests of the Government.

                                   LAW AND ANALYSIS

        Section 754 provides 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 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 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) 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.

                                      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 a § 754 election effective for its taxable year ended Date 2. 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 any related filings as instructed in
Form 1065-X or Form 8082, as appropriate, for X’s taxable year ended Date 2. A copy
of this letter should be attached to the relevant filing.
 PLR-111400-25                                  3


        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 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.

         Finally, affected partners of X must adjust the basis of their interests in X to reflect
 what the basis would be if the § 754 election had been timely made, regardless of
 whether the statutory period of limitations 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 the 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 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 that requested 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 X’s authorized representatives.
PLR-111400-25                                              4


                                                   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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