First separate the two routes
Section 754 permits an election connecting partnership distributions to section 734 and interest transfers to section 743. Its scope extends to all distributions and transfers in the election year and subsequent years, subject to regulatory revocation limitations. This is a partnership-level decision, not a one-transfer-only choice. [1]
Section 743(a)–(b) also provides an adjustment route when substantial built-in loss exists immediately after a transfer, even without a section 754 election. For this 2024 scenario, section 743(d)(1) contains two alternative tests: an entity-level basis-over-value excess exceeding $250,000, or a transferee allocation of loss exceeding $250,000 on a hypothetical sale at fair market value. Special rules and exceptions in subsections (e) and (f) also require review. [2]
Request the records before evaluating the election
The following is a proposed internal records request, not a statutory list of required documents. It organizes the facts needed to investigate the election and adjustment routes. [1] [2]
- Executed purchase agreement, consideration schedule, transfer date and description of every transaction step.
- Prior partnership returns, election statements, revocation records and related workpapers.
- Purchaser's basis records, partnership liabilities and supporting allocation schedules.
- Asset-by-asset adjusted basis and fair market value immediately after the transfer.
- Information needed to evaluate both substantial-built-in-loss tests and any special partnership exception.
Keep the workpaper open
Section 743(b) describes an adjustment with respect to the transferee partner; subsection (c) directs allocation among properties under section 755. This example does not perform either computation. Election filing procedures, allocation mechanics and exceptions require additional authority beyond this short statutory issue map. [2]
No election recommendation or adjustment amount is supplied. The immediate deliverable is a list of missing records and a separate mandatory-adjustment inquiry—not a conclusion that an election is needed or unnecessary.
Sources to inspect
Open the official authority and check the cited provision, edition, and your facts.
[1] 26 U.S.C. §754 — election scope
Official United States Code, 2024 edition; §754 on printed page 1890.
Such election may be revoked by the partnership, subject to such limitations as may be provided by regulations
[2] 26 U.S.C. §743(a)–(f) — adjustment and substantial-built-in-loss rules
Official United States Code, 2024 edition; includes the 2017 amendment and its effective-date note.
or unless the partnership has a substantial built-in loss immediately after such transfer
About this sample
Edited illustrative workpaper · synthetic facts. Derived from an actual Taxterity research run, then substantively corrected and condensed in an AI-assisted editorial/source check. The original run reported insufficient authority. This edition replaces incomplete retrieved statutory material with full official 2024 provisions, separates optional and mandatory routes, and removes the election-only regulation excerpt and case citations. It is not unedited product output, a performance benchmark, or independent approval by a tax professional.
US federal research intake only. No election advice, calculation, filing instructions, state analysis or citator review. A qualified practitioner must verify the complete applicable authorities and facts before use.