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 changes hands (including on a partner's death) or when it
distributes property. That adjustment lets the affected partner's share of the inside
basis line up with the value they effectively hold, which often produces extra
depreciation deductions or reduces later gain. The election has to be filed with the
partnership's timely return for the year of the triggering event. Here a limited
partnership had a partner die but failed to file the § 754 election with that year's
return, and it asked the IRS for relief under Treas. Reg. §§ 301.9100-1 and
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 a partner died?
• 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)(1); 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: 202629002                                              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. -----------------
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 ------------------------------------------------------------   Telephone Number:
 --------------------                                           --------------------
 -----------------------------                                  Refer Reply To:
 ---------------------------                                    CC:PT&E:B03
                                                                PLR-113652-25
                                                                Date:
                                                                April 17, 2026




LEGEND


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

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

Year             =        -------

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

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

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




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

      This letter responds to a letter dated July 10, 2025, and subsequent
correspondence, submitted by X, 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).
PLR-113652-25                                 2

                                          FACTS
        According to the information submitted, X was formed as a limited partnership
under the laws of State in Year and is classified as a partnership for federal tax
purposes. On Date 1, A, a partner in X, died. X failed to timely file a § 754 election with
its partnership return for its taxable year ended Date 2.

                                   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)(1) 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.
PLR-113652-25                                 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 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.

        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.

        Finally, affected partner(s) 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, 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 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.
PLR-113652-25                                            4

      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.


                                                   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

        cc:---

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