Rule2022-16271
Streamlining the Section 754 Election Statement
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 5, 2022
Effective
August 5, 2022
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains final regulations relating to the requirements for making a valid election to adjust the basis of partnership property in the case of a distribution of property by the partnership or a transfer of an interest in the partnership. These regulations affect partnerships and their partners by removing a regulatory burden in making an election to adjust the basis of partnership property.
Full Text
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<title>Federal Register, Volume 87 Issue 150 (Friday, August 5, 2022)</title>
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[Federal Register Volume 87, Number 150 (Friday, August 5, 2022)]
[Rules and Regulations]
[Pages 47931-47932]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-16271]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9963]
RIN 1545-BN94
Streamlining the Section 754 Election Statement
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to the
requirements for making a valid election to adjust the basis of
partnership property in the case of a distribution of property by the
partnership or a transfer of an interest in the partnership. These
regulations affect partnerships and their partners by removing a
regulatory burden in making an election to adjust the basis of
partnership property.
DATES:
Effective date: These regulations are effective on August 5, 2022.
Applicability date: For dates of applicability, see Sec. 1.754-
1(d).
FOR FURTHER INFORMATION CONTACT: Charles D. Wien, at (202) 317-5279
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) under section 754 of the Internal Revenue Code (Code).
Section 754 provides that if a partnership files an election (section
754 election), in accordance with regulations prescribed by the
Secretary of the Treasury or her delegate (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. The section 754 election applies with respect to all distributions
of property by the partnership and to all transfers of interests in the
partnership during the taxable year with respect to which the election
was filed and all subsequent taxable years. The section 754 election
may be revoked by the partnership, subject to such limitations as may
be provided by regulations prescribed by the Secretary.
Section 1.754-1(b) prescribes the requirements for making the
section 754 election. Generally, a partnership makes the section 754
election in a written statement (section 754 election
[[Page 47932]]
statement) filed with the partnership return (whether filed
electronically or on paper) for the taxable year during which the
distribution or transfer occurs. For the section 754 election to be
valid, the return must be filed not later than the time prescribed for
filing the return for such taxable year, including extensions. Under
Sec. 1.754-1(b) of the existing regulations, one of the partners must
sign the section 754 election statement.
On October 12, 2017, the Department of the Treasury (Treasury
Department) and the IRS published a notice of proposed rulemaking (REG-
116256-17) in the Federal Register (82 FR 47408) to remove the
signature requirement from Sec. 1.754-1(b). The IRS did not receive
any substantive written public comments in response to the notice of
proposed rulemaking. No public hearing was requested or held.
Therefore, the proposed regulations are adopted by this Treasury
decision without change.
Special Analyses
I. Regulatory Planning and Review
These regulations are not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Treasury Department and the Office of Management
and Budget regarding review of tax regulations.
II. Regulatory Flexibility Act
It is hereby certified that these regulations will not have a
significant economic impact on a substantial number of small entities
under the Regulatory Flexibility Act (5 U.S.C. chapter 6). This
certification is based on the fact that these regulations reduce the
information currently required to be collected in making an election to
adjust the basis of partnership property and thereby will reduce burden
on small entities. Accordingly, a regulatory flexibility analysis is
not required. Pursuant to section 7805(f) of the Code, the notice of
proposed rulemaking preceding these regulations was submitted to the
Chief Counsel for the Office of Advocacy of the Small Business
Administration for comment on its impact on small business, and no
comments were received from the Chief Counsel for the Office of
Advocacy of the Small Business Administration.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
state, local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. This rule does not include any Federal mandate that may
result in expenditures by state, local, or tribal governments, or by
the private sector in excess of that threshold.
IV. Executive Order 13132 Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial, direct compliance costs on state and local
governments, and is not required by statute, or preempts state law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive Order. These proposed regulations do not
have federalism implications and do not impose substantial direct
compliance costs on state and local governments or preempt state law
within the meaning of the Executive Order.
V. Paperwork Reduction Act
Under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), an
agency may not conduct or sponsor and a person is not required to
respond to a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget. The
information collection described in this final rule has been assigned
control number 1545-0123.
Drafting Information
The principal author of these regulations is Charles D. Wien of the
Office of the Associate Chief Counsel (Passthroughs and Special
Industries). However, other personnel from the Treasury Department and
the IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Par. 1. The authority citation for part 1 is amended by adding an entry
for Sec. 1.754-1 in numerical order to read as follows:
* * * * *
Section 1.754-1 also issued under 26 U.S.C. 754.
* * * * *
0
Par. 2. Section 1.754-1 is amended by revising the fourth sentence of
paragraph (b)(1) and adding paragraph (d) to read as follows:
Sec. 1.754-1 Time and manner of making election to adjust basis of
partnership property.
* * * * *
(b) * * *
(1) * * * The statement required by this paragraph (b)(1) must set
forth the name and address of the partnership making the election and
contain a declaration that the partnership elects under section 754 to
apply the provisions of section 734(b) and section 743(b). * * *
* * * * *
(d) Applicability date. The fourth sentence of paragraph (b)(1) of
this section applies to taxable years ending on or after August 5,
2022.Taxpayers may, however, apply the fourth sentence of paragraph
(b)(1) of this section to taxable years ending before August 5, 2022.
Approved: June 7, 2022.
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
Lily Batchelder,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2022-16271 Filed 8-4-22; 8:45 am]
BILLING CODE 4830-01-P
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