Partnership received 120 days to make late section 754 election

Plain-English summary

A domestic limited liability company treated as a partnership sold ownership interests to a new buyer and intended to make an IRC § 754 election for that year. It inadvertently failed to attach a valid election to its partnership return. The IRS concluded that the requirements for discretionary filing relief were met and granted 120 days to file the election. The relief requires the partnership to make all basis adjustments and related recovery deductions that would have applied if the election had been timely, even for closed years. Its partners must similarly adjust the bases of their partnership interests. If an administrative adjustment request is required, the partnership must file it and apply the centralized partnership audit rules.

Ruling snapshot

• Question: May the partnership make a late IRC § 754 election after inadvertently omitting it from the return for the year ownership interests were sold?
• Outcome: Approved, with a 120-day extension subject to corrective basis adjustments
• Key authorities: IRC §§ 734(b), 743(b), 754, 6227(b); 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: 202547009 Third Party Communication: None
Release Date: 11/21/2025 Date of Communication: Not Applicable
Index Number: 754.00-00, 9100.00-00,
9100.15-00 Person To Contact:
----------------------------, ID No. --------------

------------------------------------------ Telephone Number:

------------------------------ Refer Reply To:
------------------------------ CC:PT&E:B01
PLR-107606-25
Date:
August 21, 2025

LEGEND

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

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

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

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

Year = -------

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

This letter responds to a letter dated March 21, 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 to file an
election under § 754 of the Internal Revenue Code (“the Code”).

FACTS

According to the information submitted, X is a domestic limited liability company
organized under the laws of State on Date 1 and is treated as a partnership for federal
income tax purposes. On Date 2, interests in X were sold to a new buyer. X intended
to make an election under § 754 for its Year taxable year but inadvertently failed to file a
valid election under § 754 with its partnership return for its Year taxable year.

PLR-107606-25 2

LAW AND ANALYSIS

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 shall apply with respect to all distributions of property by the partnership and
to all transfers of interests in the partnership during the taxable year in 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, shall 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 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) defines the term “regulatory election” as including 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 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 making 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 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.

CONCLUSION

Based solely on the information submitted and representations made, we conclude that
the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, 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 Year taxable year and thereafter. The election
should be made in a written statement filed with the appropriate service center to be
associated with X’s return for its Year taxable year, or (2) accompanying Form 1065-X,

PLR-107606-25 3

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, to be associated with X's Year tax return. A copy of this
letter should be attached to the statement filed.

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 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 in order to properly amend a partnership return, then this
ruling is also 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 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.

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 ruling request, it is subject to verification on examination.

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.

In accordance with a power of attorney on file with this office, we are sending a copy of
this letter to your authorized representatives.

PLR-107606-25 4

Sincerely,

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

By: ___/s/__
Caroline E. Hay
Senior Technician Reviewer, Branch 1
Office of the Associate Chief Counsel
(Passthroughs, Trusts, and Estates)

Enclosure:
Copy for § 6110 purposes

cc: ------------------

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