Section 754 Election

Under the section 754 regulations however an application to revoke the election will not be approved if the revocation s primary purpose is to avoid stepping down the basis of partnership assets.

Section 754 election. A section 754 election can be a favorable tax efficiency tool that is unique to partnerships as compared to corporations. Distribution of partnership property or transfer of an interest by a partner. A section 754 election may be made for the company at the sole discretion of the members.

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. This step up in basis is used to make the outside basis basis of the partnership in the hands of the owner equal to the inside basis the basis of the assets in partnership for tax purposes. Manner of electing optional adjustment to basis of partnership property.

However the complexity administrative burden and changing economic environment should always be considered carefully. Two statements should be attached to the return for the taxable year during which the distribution or transfer occurs. This election allows the new partner to receive the benefits of depreciation or amortization that he or she may not have received if the election was not made.

1 an election under section 754 and this section to adjust the basis of partnership property under sections 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. If a partnership files an election in accordance with regulations prescribed by the secretary the basis of partnership property shall be adjusted in the case of a distribution of property in the manner provided in section 734 and in the case of a transfer of a partnership interest in the manner provided in section 743. Every general partner of a partnership should be aware of these rules and their implications.

The purpose of a section 754 election is to reconcile a new partner s outside and inside basis in the partnership. Section 754 making the election for a section 754 election to be valid a written statement must be attached to the partnership return and filed no later than the return due date including extensions. 734 b and 743 b shall be made in a written statement filed with the partnership return for the tax year during.

754 to adjust the basis of partnership property under secs.