Signature requirement cut for Section 754 elections

 

The IRS recently issued final regulations (TD 9963) removing a prior requirement that a partner sign a partnership’s Section 754 election statement.

 

Under Section 754, a partnership may elect to adjust the basis of partnership property in connection with certain distributions of cash or property and for transfers of a partnership interest. Regulations prescribing the method for making a Section 754 election previously required that the election statement be signed by one of the partnership’s partners. This partner signature requirement provided a trap for the unwary and could cause a partnership to find that it had inadvertently failed to make a valid election.

 

In October 2017, the IRS released proposed regulations to remove the partner signature requirement, which have now been finalized without change. Taxpayers were permitted to rely on the removal of the partner signature requirement in the 2017 proposed regulations prior to the issuance of final regulations. Therefore, while the final regulations to remove the partner signature requirement for Section 754 elections is welcome, the final regulations will likely not have a significant impact on partnerships or their partners.

 

 

Contact:

 
 

More tax hot topics