Get the free section 754 election statement sample

This revenue ruling addresses the treatment of net earnings or loss of a limited liability company (LLC) for Tennessee excise tax purposes specifically in relation to IRC § 754 and § 743(b) basis

How to fill out section 754 election statement

How to fill out IRC Section 754 election:

1. Determine eligibility: The first step in filling out IRC Section 754 election is to determine if you are eligible to make this election. Generally, partnerships or limited liability companies (LLCs) classified as partnerships for tax purposes are eligible to make this election.
2. Obtain the necessary forms: To make an IRC Section 754 election, you need to fill out Form 1065, U.S. Return of Partnership Income. This form includes a specific section (Schedule B) where you can elect to apply Section 754.
3. Complete Schedule B: On Schedule B of Form 1065, you need to provide the necessary information about the partnership, such as its name, employer identification number (EIN), and the tax year for which the election is being made. Indicate the election by checking the box provided for Section 754 and enter the effective date of the election.
4. Attach additional documentation if required: In some cases, the IRS may require you to attach additional documentation to support your IRC Section 754 election. This can include a statement explaining the reasons and implications of the election, as well as any relevant supporting calculations.
5. File the completed form: Once you have completed Schedule B and any additional documentation, file Form 1065 with the IRS according to the appropriate filing deadlines. Make sure to keep a copy of the filed form and all supporting documentation for your records.

Who needs IRC Section 754 election?

1. Partnerships with substantial built-in gains or losses: IRC Section 754 election is particularly relevant for partnerships that have substantial built-in gains or losses. This election allows the partnership to adjust the basis of its assets when certain events occur, such as the sale or exchange of partnership interests.
2. Partnerships experiencing ownership changes: If a partnership undergoes ownership changes, such as the admission or withdrawal of partners, an IRC Section 754 election can help mitigate potential tax consequences. It allows the partnership to adjust the basis of its assets to reflect the new partnership interests and avoid unintended tax implications.
3. Partnerships with significant disparities in fair market value: When a partnership has assets with significant disparities in fair market value, making an IRC Section 754 election can help allocate the tax consequences more accurately. This can be beneficial in situations where partners with different ownership percentages want to align their tax liability with their economic interests.

In summary, filling out IRC Section 754 election involves determining eligibility, completing the necessary forms, attaching additional documentation if required, and filing the form with the IRS. This election is relevant for partnerships with built-in gains or losses, experiencing ownership changes, or having significant disparities in asset values.

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What is irc sec 754 election?

The IRC Sec 754 election allows a partnership to step up the tax basis of partnership assets when a partnership interest is transferred or when the partnership's assets are revalued.

Who is required to file irc sec 754 election?

Partnerships with Section 754 property are required to file IRC Sec 754 election.

How to fill out irc sec 754 election?

The IRC Sec 754 election is filed by attaching a statement to the partnership's tax return for the year in which the election is made.

What is the purpose of irc sec 754 election?

The purpose of IRC Sec 754 election is to adjust the tax basis of partnership assets to reflect their fair market value when there is a transfer of a partnership interest.

What information must be reported on irc sec 754 election?

The information reported on IRC Sec 754 election includes the name and tax identification number of the partnership, a description of the property subject to the election, and the amount of the basis adjustment.