In short
A Section 754 election lets a partnership adjust the basis of its assets when a partnership interest is sold or inherited, or when certain distributions are made, so inside basis better reflects what was paid.
Key takeaways
- On a transfer, the adjustment applies only to the incoming partner.
- Once made, the election applies to all later years unless revoked with the Internal Revenue Service's consent.
- Some adjustments are mandatory even without the election, such as when there is a substantial built-in loss.
Where it's tested
TCP: Partnership Compliance & Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A Section 754 election allows a partnership to: