Partnership receives more time to make a section 754 election

Plain-English summary

The IRS granted a partnership an extension of time to make a § 754 election for a taxable year in which a partner died. The election permits adjustments to the basis of partnership property after certain distributions or transfers of partnership interests. The partnership inadvertently failed to make the election with its timely filed return. The IRS granted 120 days from the ruling date, subject to filing the required amended or administrative adjustment documents and making the related basis adjustments for the partnership and its partners.

Ruling snapshot

• Question: May the partnership make a late election under IRC § 754?
• Outcome: Approved
• Key authorities: IRC §§ 734, 743, 754, 6031, 6227, and 6110; Treas. Reg. §§ 1.754-1(b)(1) and 301.9100-1 through 301.9100-3.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202635011
Third Party Communication: None
Release Date: 8/28/2026
Date of Communication: Not Applicable
Index Numbers: 754.00-00, 754.02-00,
9100.00-00, 9100.15-00
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:PT&E:B03
PLR-120441-25
Date:
May 29, 2026

LEGEND

X = ----------------------------------------------------------------------
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A = ------------------------

State = ---------

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

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

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

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

Date 5 = --------------------------

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

This letter responds to a letter dated December 12, 2025, and subsequent correspondence, submitted on behalf of X, by its 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 (“Code”).

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FACTS

The information submitted states that X was created as a general partnership formed under the laws of State on Date 1. X converted to a limited liability partnership under the laws of State on Date 4. X has been classified as a partnership for federal tax purposes since Date 1. A, a partner in X, died on Date 2. X inadvertently failed to make a timely election under § 754 with its partnership return 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.

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.

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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 5 to be associated with X’s return for its taxable year ended Date 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 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 X is required to file an AAR to properly amend a partnership tax return, then this ruling is contingent on X filing Form 1065-X or Form 8082 and taking into account the adjustments as required by § 6227(b).

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 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.

The ruling contained in this letter is based upon information and representations submitted by X and accompanied by a penalty of perjury statement executed by an

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appropriate party. While this office has not verified any of the material submitted in support of the ruling request, it is subject to verification on examination.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the power of attorney on file with this office, we are sending a copy of this letter to X’s authorized representative.

Sincerely,

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

By: _____
Elizabeth V. Zanet
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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