Can we use Election 754 ?

The tax law permits partnerships to make an election to adjust the tax basis of club assets in certain situations. The election may be beneficial in many situations by reducing the club's taxable income in future years. The election could instead prove detrimental, however, by increasing the complexity of preparing the club's tax return and in some situations even by increasing future taxable income.

The election is made by attaching to the partnership's tax return a statement signed by a general partner indicating that the partnership has made an election to adjust the basis of its assets under IRS Code Section 754. The partnership's tax return must also show calculations of the amount of the adjustment and its allocation among the club's assets. Caution: Once this election is made, the adjustment must be made for all such transactions in the future. Line 12: In most cases, Form 8865-Return of U.S.

Because of the added complexity beyond the scope of the software, this election is not supported in the Tax Printer.

Fortunately, there's a better method. You can get results equivalent or better than those afforded under the 754 election by transferring appreciated stocks to members rather than cash, which doesn't bind the club to a particular methodology for future years.