Section 754 Internal Revenue Code

Section 743 transfer of an interest in a partnership by sale or exchange or on death of a partner.

Section 754 internal revenue code. 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. Internal revenue code 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.

Section 754 provides that 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 734 and. The purpose of a section 754 election is to reconcile a new partner s outside and inside basis in the partnership. The basis of partnership property shall not be adjusted as the result of a transfer of an interest in a partnership by sale or exchange or on the death of a partner unless the election provided by section 754 relating to optional adjustment to basis of partnership property is in effect with respect to such partnership or unless the partnership has a substantial built in loss immediately after such transfer.

There are two sections in subchapter k that allow for basis adjustment if a section 754 election is in place when the inside and outside basis differ. Like kind exchanges when you exchange real property used for business or held as an investment solely for other business or investment property that is the same type or like kind have long been permitted under the internal revenue code. Subsection c 1 a of section 197 of the internal revenue code of 1986 as added by this section and so much of subsection f 9 a of such section 197 as precedes clause i thereof shall be applied with respect to the taxpayer by treating july 25 1991 as the date of the enactment of such section and.

Manner of electing optional adjustment to basis of partnership property. 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.