Section 754; Manner of Electing Optional Adjustment to Basis of Partnership Property

Internal Revenue Service
Number: 202216007
Release Date: 4/22/2022
Index Number: 9100.15-00
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Department of the Treasury
Washington, DC 20224
Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
---, ID No. ---
Telephone Number:
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X = ---
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Refer Reply To:
CC:PSI:B01
PLR-115647-21
Date:
January 24, 2022
LEGEND
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A =
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B =
Date 1 = ---
Date 2 = ---
State = ---
Year = --- m% = --- n% = ---
Dear ---:
This letter responds to a letter dated July 19, 2021, and subsequent correspondence, submitted on behalf of X by X’s 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 (Code).

# FACTS

PLR-115647-21 2
The information submitted states that X is a State limited liability company that is classified as a partnership for federal tax purposes. On Date 1, A purchased an m% interest in X . On Date 2, B purchased an n% interest in X. X intended to make an election under § 754 for the year of A’s and B’s purchase (Year). However, X inadvertently failed to timely file the election.
X represents that it has filed returns for its Year tax year and subsequent tax years consistent with the election having been made, and that all affected partners have also filed their returns consistent with the election having been made.

# 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 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 § 1.6031-1(e) (including extensions) for filing the return for such taxable year.
Under § 301.9100-1(c), the Commissioner may grant a reasonable extension of time 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 Internal Revenue Code, except subtitles E, G, H, and I. Section 301.9100-1(b) defines the term “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.
Sections 301.9100-1 through 301.9100-3 provide the standards that 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 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 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 PLR-115647-21 3

# CONCLUSION

Based solely on 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 partnership’s Year tax year. The election should be made in a written statement filed with the applicable service center for association with X's Year tax return. 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 or the regulations thereunder. 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.
This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that it may not be used or cited as precedent.
The ruling contained in this letter is based on 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.
In accordance with the Power of Attorney on file with this office, we have sent a copy of this letter to your authorized representative.
Sincerely,
Holly Porter
Associate Chief Counsel
(Passthroughs & Special Industries)
By: ____
Jennifer N. Keeney
Senior Counsel, Branch 1
Office of the Associate Chief Counsel
Enclosure
Copy for § 6110 purposes cc: