Section 754

1 754 1 b 1 provides that an election under sec.

Section 754. The basis of partnership property shall not be adjusted as the result of a transfer of an interest in a partnership by sale or exchange or on the death of a partner unless the election provided by section 754 relating to optional adjustment to basis of partnership property is in effect with respect to such partnership or unless the partnership has a substantial built in loss immediately. 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.

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. 754 to adjust the basis of partnership property under secs. This step up in basis is used to make the outside basis basis of the partnership in the hands of the owner equal.

Section 754 and 743 b depreciation is usually used to reduce the income reported on the k 1 from the partnership side. 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. 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 election.

A section 754 depreciation adjustment reported on the supplemental information page of a k 1 does not usually need to be reported anywhere on the individual tax return. However the complexity administrative burden and changing economic environment should always be considered carefully. Under section 754 a partnership may elect to adjust the basis of partnership property when property is distributed or when a partnership interest is transferred.

This determination is normally done at the end of the year and is vital to ascertaining the partner s. Section 754 of the us internal revenue code provides a set of rules that govern the tax allotted for a partner. The purpose of a section 754 election is to reconcile a new partner s outside and inside basis in the partnership.

Specifically the partnership is.