Is Section 754 election required?

Since a Section 754 election is difficult to revoke, tends to increase the partnership’s administrative burdens, and applies on a mandatory basis to both distributions of partnership assets and transfers of partnership interests, the partnership (and partners) should thoroughly analyze the situation before making the …

When should you make a 754 election?

If the partnership decides they want the step-up they must make the 754 election. It must be made before the due date of the income tax return, including extensions, for the year that the transfer occurs.

Who can make a 754 election?

Section 754 elections are available only to partnerships and LLCs taxed as partnerships for which the entity’s income and losses pass through to each partner.

What is Section 754 Step Up?

Section 754 allows a partnership to make an election to “step-up” the basis of the assets within a partnership when one of two events occurs: distribution of partnership property or transfer of an interest by a partner. The election is made by filing a written statement with the tax return.

What do you need to know about IRC section 754?

The statement must include (1) the name and address of the partnership, and (2) a declaration that the partnership elects under IRC Section 754 to apply the provisions of IRC Sections 734 (b) and 743 (b). See Proposed Treasury Regulation Section 1.754-1 (b) (1).

Do you need 9100 relief for section 754?

Accordingly, partnerships that filed a timely partnership return containing an otherwise valid section 754 election statement, but for the missing signature of a partner on the statement, will not need to seek 9100 relief in such cases.

Is the IRS proposing to remove the signature requirement in section 754?

In order to ease the burden on partnerships seeking to make a valid section 754 election and to eliminate the need to seek 9100 relief, the Treasury Department and the IRS are proposing to amend the current regulation to remove the signature requirement in § 1.754-1(b)(1).

Where does the 754 go in a partnership?

No entry is made to record the $10,000 754 asset on the books of the partnership: the $10,000 is reflected in partner B and C’s outside bases. Additional depreciation/amortization deductions will be specifically allocated to these partners in the future.

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