Section 754 Step Up

Distribution of partnership property or transfer of an interest by a partner.

Section 754 step up. A section 754 election applies to all property distributions and transfers of partnership interests during the partnership tax year for which the election is made plus for all later tax years unless revoked. 754 and basis adjustments displaying top 8 worksheets found for this concept. This step up in basis is used to make the outside basis basis of the partnership in the hands of the owner equal to the inside basis the basis of the assets in partnership for tax purposes.

In other words the partnership will step up or step down its basis in partnership property when a specific event a property distribution or the transfer of a partnership interest occurs. 734 b and 743 b shall be made in a written statement filed with the partnership return for the tax year during which the distribution or transfer occurs. Some of the worksheets for this concept are 754 and basis adjustments for and llc interests section 14 754 election with sales exchanges and death basis adjustments for partnerships and llcs compliance ppc 1065 deskbook practice aids partners adjusted basis work outside basis tax prosystem fx tax partnership.

Where a section 754 election is in effect and distributions give rise to gain for a distributee partner or the recipient partner adjusts the basis of the property received section 734 b will cause the partnership to step up the basis of its remaining assets by a calculated amount. The above scenario can be remedied by the fund making a section 754 election and adjusting the basis pursuant to section 743 b. Learning objectives determine the amount of a section 754 basis step up know how to allocate the basis step up to the partnership s assets know how a partnership makes a section 754 election and reports it to the irs.

Section 754 allows a partnership to make an election to step up the basis of the assets within a partnership when one of two events occurs. Specifically the partnership is. 1 754 1 b 1 provides that an election under sec.

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. 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. The purpose of a section 754 election is to reconcile a new partner s outside and inside basis in the partnership.

This election allows the new partner to receive the benefits of depreciation or amortization that he or she may not have received if the election was not made.