There are 3 IRS requirements for a partnership to elect to adjust its basis:
- Answer "yes" to Form 1065, page 2, Question 10a, 10b, or 10c.
- Submit an election statement stating the intent to adjust the basis.
- Submit a statement showing the computation and allocation of the basis adjustment.
Follow these steps to answer Form 1065, Question 10a, 10b, and/or 10c:
- Go to Screen 5, Other Information (Schedule B).
- Check the applicable boxes for lines 10a, 10b, and/or 10c:
- Partnership is making, or has in effect, a Section 754 election
- Partnership made an option basis adjustment
- Partnership is required to adjust the basis of partnership assets
Follow these steps to generate an election statement:
- Go to Screen 33, Elections.
- Click on the Misc. Election button.
- Check the box Adjust basis of partnership property [1.754-(b)(1)].
- This will print an election statement.
Lacerte will generate diagnostic ref. #27122 stating:
The Election to Adjust the Basis of Partnership Property has been generated for this return. Due to the signature requirement, attach a copy of the election with the signature to the return as a PDF attachment. The election statement will need to be printed and signed before being scanned as a PDF and attached to the return via Screen 4, Electronic Filing.
Follow these steps to generate a statement showing the computation and allocation of the basis adjustment:
- Go to Screen 34, Notes.
- Select Statement under the Print As section from the left navigation panel.
- Enter the required information.
- Refer to the Instructions for Form 1065 to learn what information is required to appear on the statement.
Refer to this article for instructions on entering and allocating the step up in basis.