Internal Revenue Code Section 754

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.

Internal revenue code section 754. This basis adjustment to partnership property could be either an increase or decrease in basis depending on the new partner s purchase price and the partnership s basis in its property. Internal revenue 26 cfr part 1 income taxes. The amendment made by this section amending this section shall apply to distributions after the date of the enactment of this act oct.

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. Manner of electing optional adjustment to basis of partnership property. Any increase in a partner s share of the liabilities of a partnership or any increase in a partner s individual liabilities by reason of the assumption by such partner of partnership liabilities shall be considered as a contribution of money by such partner to the partnership.

Internal revenue code 754. 743 b 1. Manner of electing optional adjustment to basis of partnership property on westlaw.

B decrease in partner s liabilities. 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 can be a favorable tax efficiency tool that is unique to partnerships as compared to corporations.

22 2004 title 26. The purpose of a section 754 election is to reconcile a new partner s outside and inside basis in the partnership. Manner of electing optional adjustment to basis of partnership property.

In the case of a transfer of an interest in a partnership by sale or exchange or upon the death of a partner a partnership with respect to which the election provided in section 754 is in effect or which has a substantial built in loss immediately after such transfer shall i r c. Pursuant to internal revenue code section 754 a partnership may file an election to adjust the basis of the partnership property for federal tax purposes. Findlaw codes are provided courtesy of thomson reuters westlaw the industry leading online legal research system.