PLR 9939015: Partnership gets 30 days to replace a Section 754 election with the wrong year

Plain-English summary

A partnership intended to elect basis adjustments under § 754 on its final return, but the return carrying the election stated the wrong ending date. Uncertain whether that election worked, the partnership requested time to make a new election for the correct tax year. The IRS found the requirements for relief under the § 301.9100 regulations satisfied. It granted the partnership 30 days from the letter date to file the proper election for that year. The letter gave no opinion on other tax consequences of the transaction.

Ruling snapshot

• Question: May the partnership file a new § 754 election for the correct tax year?
• Outcome: Approved: a 30-day extension to file the election.
• Key authorities: IRC § 754; Treas. Reg. §§ 1.754-1(b) and 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: 199939015
Person to Contact:
Release Date: 10/1/1999
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:Br.1-PLR-109305-99
Date:
June 28, 1999

Legend

PRS
=

STATE
=

D1
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D2
=

This responds to your letter dated April 27, 1999, and subsequent correspondence, 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. PRS intended to elect to use § 754 to adjust the basis of partnership property on its final tax return for its taxable year ending D1. PRS, however, filed the § 754 election with a final tax return that it stated was for PRS’s final taxable year ending D2. Because of the uncertainty regarding the effectiveness of the § 754 election on a return with an erroneous ending date, PRS is seeking relief under § 301.9100-3 of the Procedure and Administration Regulations to file a new § 754 election for its taxable year ending D1.

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. 2 PLR-109305-99

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 § 301.9100-3 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 3 PLR-109305-99

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