PLR 9937030: Partnership gets 30 days to make a late § 754 basis election

Plain-English summary

A partnership intended to elect under § 754 to adjust the basis of partnership property but omitted the election from its return. After discovering the omission, it asked the IRS for more time under the regulatory election relief rules. Based on the facts and representations submitted, the IRS granted an extension and gave the partnership 30 days from the letter date to file the election with the applicable service center. The letter decided only the timing relief and expressed no opinion on other tax consequences of the transaction.

Ruling snapshot

• Question: May the partnership make its missed § 754 election after the return deadline?
• Outcome: Approved (30-day extension to file the election)
• Key authorities: IRC § 754; Treas. Reg. §§ 1.754-1(b), 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Index Number: 9100.15-00; 754.02-00 Washington, DC 20224

Number: 199937030
Person to Contact:
Release Date: 9/17/1999
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:Br.1-PLR-107562-99
Date:
June 21, 1999

Legend

PRS
=

STATE
=

CITY, STATE =

D1
=

This responds to your letter dated April 16, 1999, written on behalf of PRS, requesting a ruling that PRS be given an extension of time to elect to adjust the basis of partnership property pursuant to § 754 of the Internal Revenue Code.

FACTS

PRS is a domestic partnership organized under the laws of STATE. Its headquarters are located in CITY, STATE. PRS intended to elect to use § 754 to adjust the basis of partnership property on its tax return for its taxable year ending D1 but failed to file the election with its tax return. Subsequently, PRS realized that it had not filed the election and it is now seeking relief § 301.9100-3 of the Procedure and Administration Regulations.

PRS represents that it has acted reasonably and in good faith, that granting relief will not prejudice the interests of the government, and that it is not using hindsight in making the election.

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PLR-107562-99

LAW AND ANALYSIS

Under § 754, a partnership may elect to adjust the basis of partnership property where there is a distribution of property or a transfer of a partnership interest. The election applies to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable year that the election applies and all subsequent taxable years.

The election must be made in a written statement filed with the partnership return for the taxable year during which the distribution or transfer occurs. The return must be filed not later than the time prescribed for filing the return for that taxable year, including extensions thereof. Section 1.754-1(b) of the Income Tax Regulations.

Section 1.754-1(b) refers to § 1.9100-1 (now § 301.9100-1 of the Procedure and Administration Regulations) for rules regarding extensions of time for filing elections.

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a reasonable extension of time under the rules set forth in § 301.9100-3 to make a regulatory election. Section 301.9100-1(b) defines a 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.

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good faith, and that granting relief will not prejudice the interests of the Government. Section 301.9100- 3(a).

CONCLUSIONS

Based solely on the facts submitted and representations made, we conclude that the requirements of § 301.9000-3 have been satisfied. As a result, PRS is granted an extension of time to elect to adjust the basis of partnership property pursuant to § 754 for its tax year ending D1. PRS has until 30 days from the date of this letter to file the appropriate form with the applicable service center to make the election.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

The rulings contained in this letter are 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 request for rulings, it is subject to verification on

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examination.

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

Pursuant to a power of attorney on file with this office, a copy of this letter is being sent to PRS.

Sincerely,

Signed/Paul F. Kugler

Paul F. Kugler
Assistant Chief Counsel
(Passthroughs and Special Industries)

Enclosures (2)
Copy of this letter
Copy for section 6110 purposes