IRS and Treasury Issue Final Regulations on Partnership Basis Elections
The IRS and the U.S. Treasury Department recently issued final regulations (T.D. 9963) stating that partnerships electing to adjust the basis of partnership property under Sec. 754 do not have to include a signature on their election statement.
The amendment is intended to streamline making the election for partnerships. The regulations adopt proposed regulations (REG-116256-17) issued in 2017 and amend Regs. Sec. 1.754-1(b), which provides the general requirements for making a Sec. 754 election.
Generally, a partnership files a written election statement with its partnership return for the tax year in which the distribution or transfer occurs. Under the existing regulations, a partner must sign the statement, regardless of whether the return and statement are filed electronically or on paper. Many requests by partnerships for relief under Regs. Sec. 301.9100-3 had unsigned Sec. 754 elections, making them invalid – particularly those filed electronically, the preamble to the proposed regulations stated.
The final regulations are effective beginning Aug. 5, 2022.