Partnership received 120 days to make a late section 754 election

Plain-English summary

A limited partnership failed to include a section 754 election with its return for the year in which a partner died. That election allows partnership property basis adjustments after certain property distributions or transfers of partnership interests. The partnership asked for regulatory relief to make the election after the original deadline. Based on the submitted information and representations, the IRS found that the partnership acted reasonably and in good faith and that relief would not prejudice the government. It granted 120 days to file the election, effective for the return year at issue and later years.

Ruling snapshot

• Question: Could the partnership make a late section 754 election after a partner's death?
• Outcome: Approved, with 120 days to file the election statement.
• Key authorities: IRC §§ 734(b), 743(b), 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
                                                             Washington, DC 20224

Number: 201744003                                            Third Party Communication: None
Release Date: 11/3/2017                                      Date of Communication: Not Applicable
Index Number: 9100.15-00
                                                             Person To Contact:
------------------------------                               -----------------------, ID No. --------------
-------------------------------------                        Telephone Number:
-------------------                                          ----------------------
--------------------------                                   Refer Reply To:
                                                             CC:PSI:B01
                                                             PLR-104079-17
                                                             Date:
                                                             July 28, 2017


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

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

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

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

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

Dear --------------

This responds to a letter dated January 10, 2017, submitted on behalf of X by X’s
authorized representatives, requesting an extension of time under § 301.9100-3 of the
Procedure and Administration Regulations to file an election under § 754 of the Internal
Revenue Code (Code).

FACTS

The information submitted states that X was formed as a limited partnership under State
law and is classified as a partnership for federal tax purposes. A, a partner in X, died on
Date 1. X’s tax return for the taxable year ended Date 2 was filed without a § 754
election.

LAW AND ANALYSIS

Section 754 provides that a partnership may elect to adjust the basis of partnership
property when there is a distribution of property or a transfer of a partnership interest.
An election under § 754 applies with respect to all distributions of property by the
partnership and to all transfers of interests in the partnership during the taxable year
PLR-104079-17                                 2

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 not later than the time prescribed by § 1.6031(a)-1(e) (including extensions) for
filing the return for that taxable year.

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 automatic extensions of time for making certain elections. Section
301.9100-3 provides extensions of time for regulatory elections that do not meet the
requirements of § 301.9100-2.

Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 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 the taxpayer
acted reasonably and in good faith, and the grant of relief will not prejudice the interests
of the Government.

CONCLUSION

Based solely on 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
an election under § 754, effective for its taxable year ended Date 2 and thereafter. The
election should be made in a written statement filed with the applicable service center
for association with X’s return for the taxable year ended Date 2. A copy of this letter
should be attached to the statement filed.

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 the taxpayer is otherwise eligible to make
the election.
PLR-104079-17                                3

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




                                      Sincerely,

                                      Associate Chief Counsel
                                      (Passthroughs & Special Industries)


                                     Joy C. Spies
                                 By: ____________________________
                                     Joy C. Spies
                                     Senior Technician Reviewer, Branch 1
                                     (Passthroughs & Special Industries)


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