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PARTNERS & PARTNERSHIPS

Extensions of time revocation request using newly released defaults to a corporation. In several
In several private letter rulings during Form 15254, Request for Section 754 instances this past year a foreign entity
this period,23 the IRS granted an exten- Revocation, which must be filed no failed to make the election in a timely
sion of time to make a Sec. 754 election. later than 30 days after the close of the manner. In each of these instances26 the
In each case, the partnership was eligible partnership’s tax year and must state the IRS allowed the entity 120 days after the
to make the election but had inadver- reason(s) for requesting a revocation. ruling to file the election.
tently omitted the election when filing The regulations provide examples of Partnerships that qualify as qualified
its return. The IRS reasoned that the situations that may warrant the IRS’s opportunity funds under Sec. 1400Z
partnership in each case acted reason- approval of a partnership’s revocation must also file an election to self-certify
ably and in good faith, and it granted an application. A revocation application will their assets. In one instance this past
extension to file the election under Regs. not be approved when the revocation’s year27 a partnership missed the deadline
Secs. 301.9100-1 and -3. In these rulings, purpose is primarily to avoid a reduction for the election and requested additional
each partnership had 120 days after the in the basis of partnership assets upon time to file the election. In this instance,
ruling to file the election. In some cases, a transfer or distribution of partner- the partnership was granted only 45 days
the IRS granted the partnerships the ex- ship property. after the ruling to file the election. ■
tension even though they had relied on a This past year the IRS provided
professional tax adviser or preparer when updated procedures in memorandum
they failed to timely make the election.24 LB&I-04-0621-0004 (8/21/21) for its
employees to follow when reviewing
Missed elections Form 15254. Before a Sec. 754 election Contributor
The Sec. 754 election is allowed when is finalized, it must be reviewed and
a partner dies and his or her interest is approved by a manager and the Chief Hughlene A. Burton, CPA, Ph.D., is
transferred. In many cases the election Counsel’s office. This guidance applies an associate professor and the for-
is inadvertently missed in this situation. to any partnership, whether subject to mer director of the Turner School of
Last year the IRS granted an extension TEFRA, the BBA, or separate defi- Accounting at the University of North
of time to make the Sec. 754 election in ciency proceedings. Carolina–Charlotte in Charlotte, N.C.
several situations where a partner died She is a past chair of the AICPA Part-
and the partnership missed making the Other elections nership Taxation Technical Resource
election.25 Foreign entities formed as LLCs that Panel and has served on the AICPA
want to be taxed as a partnership in the Tax Executive Committee. For more
Revoking a Sec. 754 election United States must make an election on information about this article, contact
A partnership that wants to revoke Form 8832, Entity Classification Election. thetaxadviser@aicpa.org.
its Sec. 754 election should file its Without this election, this type of entity

23. E.g., IRS Letter Rulings 202108009, 202120009, and 202129003. 26. E.g., IRS Letter Rulings 202113004, 202130010, 202136001,
24. E.g., IRS Letter Rulings 202113003 and 202114003. and 202138005.
25. E.g., IRS Letter Rulings 202050011, 202130006, and 202135007. 27. E.g., IRS Letter Ruling 202120010.

AICPA RESOURCES

CPE self-study Tax Section member resources
Reviewing Partnership Returns 2021 Partnership Engagement Letter – Form 1065
Advanced Taxation Partnerships & LLCs — Tax Staff Essentials 2021 Partnership Income Tax Return Organizer – Form 1065
For more information or to make a purchase, visit the
AICPA store or call the Institute at 888-777-7077.

44 February 2022 The Tax Adviser