Section 754 (Manner of electing optional adjustment to basis of partnership property) allows a partnership to make an irrevocable election to adjust the inside basis of partnership property in two scenarios: (1) §743(b) - upon TRANSFER of a partnership interest by sale, exchange, or upon a partner's death, the inside basis of partnership property is adjusted with respect to the TRANSFEREE PARTNER ONLY (preventing phantom gain on subsequent sale of appreciated partnership property); and (2) §734(b) - upon DISTRIBUTION of partnership property to a partner, inside basis of remaining partnership property is adjusted (to either preserve gain that distributee would otherwise recognize on excess distribution, or capture loss from a basis-reducing distribution). A SINGLE §754 election covers BOTH §743(b) and §734(b); cannot elect separately. Election is made on a TIMELY-FILED Form 1065 (with extensions) for the partnership tax year in which the relevant transfer or distribution occurs - the election is IRREVOCABLE except with IRS consent under Reg §1.754-1(c) (which IRS rarely grants). Once made, the election applies to all subsequent transfers and distributions in that year and all future years. The TCJA (P.L. 115-97 §13502, December 22, 2017) added the SUBSTANTIAL BUILT-IN LOSS rule under §743(d) - a MANDATORY §743(b) adjustment when partnership has substantial built-in loss immediately after transfer of partnership interest, EVEN WITHOUT §754 election. Substantial built-in loss exists if (a) partnership's adjusted basis in its property exceeds FMV by more than $250,000, OR (b) transferee partner would be allocated loss in excess of $250,000 if partnership sold all assets for cash equal to FMV. Post-TCJA, technical termination under former §708(b)(1)(B) was REPEALED - no longer triggers §743(b) adjustment. The IRS January 2025 final regulations (T.D. 10028, 90 Fed. Reg. 2958, January 14, 2025) identified partnership related-party basis adjustment transactions under Reg §1.6011-18 as "transactions of interest" (REPORTABLE TRANSACTIONS) - basis increases under §732, §734, or §743 between related persons above a $10 million threshold ($25 million for transactions within the six-year lookback period) are reportable. On March 6, 2026, Treasury and the IRS proposed to remove Reg §1.6011-18 (REG-108921-25), and Notice 2025-23 waives the related penalties in the interim. The Tax Court in Otay Project LP v. Commissioner (T.C. Memo 2026-21, February 2026) denied a $714 million §743(b) deduction on economic substance grounds. §755 governs ALLOCATION of basis adjustment among partnership properties (capital gain property class vs ordinary income property class; FMV-based within class). Allocation to §197 intangibles (goodwill) amortized over 15 YEARS by transferee even if remaining useful life of partnership's intangibles is shorter.
What it does: Aligns inside basis (partnership's basis in its assets) with outside basis (partner's basis in partnership interest) after a transfer or distribution. Without it, incoming partner faces phantom gain when partnership sells appreciated asset.
§743(b) trigger: Transfer of partnership interest by sale, exchange, or death. Adjusts inside basis ONLY with respect to transferee.
§734(b) trigger: Distribution of property to a partner that causes gain recognition or basis adjustment under §732. Adjusts inside basis with respect to REMAINING partners.
Election mechanics: Single irrevocable election on Form 1065 covers both. Applies to all subsequent qualifying events. Reg §1.754-1(b) - made by attaching statement.
Mandatory without election: §743(b) MANDATORY when "substantial built-in loss" exists (>$250K excess basis over FMV, or transferee allocated loss >$250K). §734(b) MANDATORY when "substantial basis reduction" exists (downward adjustment exceeds $250K).
2025 transaction-of-interest reporting: Final regs T.D. 10028 require disclosure on Form 8886 for certain related-party basis adjustments above $10M ($25M for transactions within the six-year lookback period); Treasury and the IRS proposed removing the regulations on March 6, 2026 (REG-108921-25), and Notice 2025-23 waives the related penalties in the interim.
Facts: Real estate partnership ABC has 4 partners, each with $250,000 capital account. Partnership owns one building purchased for $1,000,000 with $1,000,000 inside basis remaining. Building now worth $1,800,000.
Without §754 election - Partner D buys Partner B's 25% interest for $450,000 (FMV of share):
Partner D outside basis: $450,000 (what he paid)
Partner D share of inside basis: $250,000 (unchanged - partnership inside basis still $1M)
One year later, partnership sells building for $1,800,000.
Partnership recognizes gain: $1,800,000 - $1,000,000 = $800,000
Partner D allocated 25% = $200,000 of taxable gain
BUT Partner D already paid $450,000 for an interest reflecting his share of the appreciated FMV - he's now paying TAX on appreciation that occurred BEFORE he bought in.
With §754 election (§743(b) adjustment for transferee):
Partner D outside basis: $450,000
Partner D share of inside basis WITHOUT adjustment: $250,000
§743(b) adjustment = $450,000 - $250,000 = $200,000 ADDITIONAL inside basis allocated to Partner D's share of partnership assets
One year later, partnership sells building for $1,800,000.
Partnership tax gain: $800,000 allocated $200,000 to Partner D
Partner D's special §743(b) basis adjustment: $200,000 reduction in gain
Partner D's net taxable gain: $0 (correctly reflecting he bought in at FMV)
Other partners (A, C, and the partnership's tracking of D's adjustment) unaffected by §743(b) on D's behalf.
| §743(b) Element | Detail |
|---|---|
| Authority | IRC §743(b) and Reg §1.743-1 |
| Trigger | Transfer of partnership interest by sale, exchange, or death of partner |
| Activation | (a) Partnership has §754 election in effect; OR (b) Substantial built-in loss exists immediately after transfer (§743(d) - mandatory) |
| Effect | Inside basis of partnership property INCREASED or DECREASED to align with transferee's purchase price (outside basis) |
| Computation | Adjustment = Transferee's outside basis MINUS transferee's proportionate share of inside basis (positive = step-up; negative = step-down) |
| Transferee's share of inside basis | Per Reg §1.743-1(d) - share of "previously taxed capital" PLUS share of partnership liabilities; tax-book-FMV "hypothetical liquidation" method generally applied |
| Allocation among assets | Under §755 and Reg §1.755-1 - among capital gain property and ordinary income property classes; within class, by FMV |
| Tracking | Adjustment maintained on partnership books PARTNER-BY-PARTNER; not allocated to other partners |
| Death of partner step-up | Heir's outside basis = FMV at date of death (§1014); §743(b) brings inside basis up to FMV with respect to heir only |
| Substantial Built-In Loss Element | Detail |
|---|---|
| Authority | §743(d) - amended by TCJA P.L. 115-97 §13502(a) effective for transfers after December 31, 2017 |
| Test 1 - Partnership-level | Partnership's adjusted basis in property exceeds FMV by more than $250,000 |
| Test 2 - Transferee-level (added by TCJA) | Transferee would be allocated loss of more than $250,000 if partnership sold all assets for cash equal to FMV immediately after transfer |
| Either test triggers mandatory §743(b) | Even without §754 election in place |
| Adjustment is DOWNWARD | Decreases inside basis with respect to transferee - prevents transferee from being allocated built-in loss that should remain with original partner |
| Securitization partnership exception | §743(f) - securitization partnerships are not treated as having a substantial built-in loss (§743(e) separately provides alternative rules for electing investment partnerships) |
| Pre-TCJA position | Only Test 1 applied; Test 2 added to address tax shelter abuses where specially-allocated built-in losses to specific partners weren't caught by partnership-level test |
| §734(b) Element | Detail |
|---|---|
| Authority | IRC §734(b) and Reg §1.734-1 |
| Trigger 1 - Excess distribution | Distributee partner recognizes gain because sum of money + adjusted basis of property distributed exceeds partner's outside basis |
| Trigger 2 - Basis adjustment under §732 | Upon complete liquidation of distributee's interest, distributee's basis in distributed property differs from partnership's basis (§732(b)) |
| Activation | (a) §754 election in effect; OR (b) Substantial basis reduction exists under §734(d) - mandatory |
| Effect | Inside basis of REMAINING partnership property adjusted (INCREASED for trigger 1 gain recognized; DECREASED for downward §732 adjustment) |
| Adjustment amount | Equal to gain recognized by distributee OR amount of downward §732 adjustment |
| Allocation | Under §755 and Reg §1.755-1 - among remaining partnership property |
| §734(d) substantial basis reduction | Downward §732 adjustment exceeding $250,000; mandatory §734(b) adjustment even without §754 |
| Affects all remaining partners | Unlike §743(b), §734(b) impacts all remaining partners proportionately |
| §755 Allocation Element | Detail |
|---|---|
| Authority | IRC §755 and Reg §1.755-1 |
| Two property classes | (1) Capital gain property (capital assets and §1231 property); (2) Ordinary income property (inventory, accounts receivable, depreciable property to extent of recapture) |
| Step 1 - Class allocation | Adjustment allocated between classes based on relative appreciation/depreciation within each class |
| Step 2 - Within-class allocation | By FMV of properties within each class (subject to special rules for negative adjustments) |
| Negative adjustments | Allocated first to assets with built-in gain within class, then to others; cannot reduce basis below zero |
| §197 intangibles (goodwill) | Treated as capital gain property; positive adjustment amortized by transferee over 15 YEARS regardless of partnership's remaining useful life - Reg §1.197-2(g)(3) |
| Inventory | Adjustment to inventory increases COGS upon sale of inventory; no acceleration into other assets |
| Sub-assets in same class | Multiple individual assets may need adjustment; track each separately on partnership books |
| Election Element | Detail |
|---|---|
| How to make | Attach written statement to TIMELY-FILED Form 1065 (including extensions) for year of triggering event; statement signed by any partner; must explicitly reference §754 |
| Statement content | Partnership name, address, taxpayer ID, declaration of §754 election, signature |
| Year of effect | Year of qualifying transfer/distribution AND ALL SUBSEQUENT YEARS |
| Irrevocable | Per §754 - irrevocable except with IRS consent under Reg §1.754-1(c); consent rarely granted |
| Revocation grounds (when IRS may grant) | Change in nature of partnership business; substantial increase in assets; change in character of assets; increased frequency of retirements/transfers |
| Pre-2018 automatic election under §708(b)(1)(B) | Eliminated by TCJA - technical termination repealed; no automatic refresh of §754 |
| Failed to file timely | Reg §1.9100-2 automatic 12-month extension for §754 election OR §1.9100-3 discretionary relief for inadvertent failures |
| Late §1.9100-3 relief | Available if reasonable reliance and good faith; PLR may be required |
| Bookkeeping Requirement | Detail |
|---|---|
| Per-partner tracking | §743(b) adjustment is PARTNER-SPECIFIC - tracked separately for each transferee on partnership books |
| Asset-level allocation | Adjustment allocated to specific partnership assets under §755; track on each asset |
| Annual recovery | Adjustment to depreciable property recovered over remaining useful life; immediate deduction if allocated to inventory upon sale |
| Asset disposition | Upon partnership sale of asset with §743(b) adjustment, transferee's gain/loss allocation reduced/increased by adjustment |
| K-1 reporting | §743(b) adjustment income impact reported on transferee's K-1 line 11 / 13 / etc.; ordinary depreciation through line 1 for ordinary income property |
| Loss of records | Successor accountants must reconstruct §743(b) basis from prior partnership records; significant audit risk if records inadequate |
| Multi-tier partnerships | §743(b) of upper-tier partnership flows through; lower-tier separate tracking - Reg §1.743-1(h) |
| Death Coordination | Detail |
|---|---|
| Heir's outside basis | FMV at date of death under §1014(a) - basis step-up |
| Heir's share of inside basis | Unchanged at partnership level absent §743(b) - heir would face phantom gain |
| With §754 election | §743(b) adjustment aligns heir's share of inside basis with stepped-up outside basis |
| Without §754 election | Heir bears built-in gain that originally accrued to decedent; effectively double-taxes the appreciation (estate tax + income tax on partnership's eventual sale) |
| Substantial built-in loss check | §743(d) still applies - mandatory §743(b) adjustment if partnership has substantial built-in loss |
| IRD exception §1014(c) | Income in respect of decedent NOT eligible for §1014 step-up - applies to certain partnership items like unrealized receivables (§751 hot assets) |
| Hot asset §751 issue | §751(a) "hot assets" (unrealized receivables, inventory) treated as IRD - no step-up; ordinary income gain on partnership's eventual collection/sale |
| Reverse §754 Issue | Detail |
|---|---|
| Why considered | §754 once-elected applies forever; if partnership now in net loss position (basis > FMV), §743(b) DECREASES inside basis on transfers; may be undesirable |
| Revocation under Reg §1.754-1(c) | Permitted only with IRS consent; consent rarely granted; established grounds include changed circumstances |
| Automatic acceptable grounds | Change in nature of partnership business; substantial increase in assets; change in character of assets; increased frequency of retirements or shifts of interests |
| Inappropriate grounds | Sole purpose of avoiding §743(b) downward adjustment NOT acceptable basis for revocation |
| Application procedure | Letter to IRS within 30 days after end of partnership year for which revocation sought; specific grounds and documentation |
| Substantial built-in loss override | Even with revocation, §743(d) mandatory adjustment still applies if substantial built-in loss exists - cannot avoid mandatory adjustment by revoking §754 |
| Transaction of Interest Element | Detail |
|---|---|
| Authority | Reg §1.6011-18 finalized in T.D. 10028 (90 Fed. Reg. 2958, January 14, 2025); removal proposed March 6, 2026 (REG-108921-25) |
| Four reportable transactions identified | (1) Distribution to related partner with §732 basis increase; (2) Distribution to related partner with §734(b) basis increase; (3) §732(d) basis adjustment in distribution to related partner; (4) Transfer of partnership interest to related partner with §743(b) basis increase |
| Threshold | Basis increase threshold of $10,000,000 ($25,000,000 for transactions within the six-year lookback period: the 72 months immediately preceding the first month of the taxpayer's most recent taxable year that began before January 14, 2025) (Reg §1.6011-18(b)(11), (c)(3)) |
| Related party | Under §267(b) or §707(b)(1) |
| Reporting | Form 8886 (Reportable Transaction Disclosure Statement); penalty for failure to disclose under §6707A is capped at $50,000 ($10,000 for a natural person) for a reportable transaction that is not a listed transaction, and the IRS has waived §6707A(a) penalties for these transactions under Notice 2025-23 |
| Rev. Rul. 2024-14 | IRS announced intent to challenge transactions lacking economic substance under §7701(o) |
| Otay Project case | T.C. Memo 2026-21 (February 2026) denied $714 million §743(b) deduction on economic substance grounds |
| Forthcoming mechanical regs | Treasury / IRS Notice 2024-54 - proposed regs would mechanically reduce or eliminate benefit of related-party basis adjustments; retroactive in effect |
| Special Rule | Treatment |
|---|---|
| §704(c) built-in gain/loss | Contributed property with built-in gain/loss tracked separately under §704(c); §743(b) adjustment to transferee partner does NOT alter §704(c) tracking |
| Securitization partnerships §743(f); electing investment partnerships §743(e) | Securitization partnerships are not treated as having a substantial built-in loss under §743(d); electing investment partnerships follow the alternative rules of §743(e) |
| UBI partnerships | §743(b) adjustments by tax-exempt partners create UBTI issues; special analysis |
| Disguised sale §707(a)(2)(B) | If transaction recharacterized as disguised sale, §743(b) adjustment may be inapplicable - transferee is not a partner |
| §708(b)(1)(B) technical termination REPEALED | Post-TCJA - no longer triggers §743(b); partnership continues uninterrupted |
| §708(a) termination (no remaining business) | Different from technical termination; §743(b) tracking ends with partnership |
| S-corp §1377 election analogy | S-corp basis adjustments DIFFERENT - no §754 equivalent; closing-of-the-books election under §1377(a)(2) addresses different issue |
| Investment partnerships §731(c) | Marketable security distributions special rules; §734(b) adjustment may apply |
Facts: Partnership PRS has 3 equal partners A, B, C. Assets:
- Land: basis $30, FMV $90
- Equipment: basis $60, FMV $30 (cost $200, $140 depreciation, FMV $30 - built-in loss)
- Cash: $30
Total inside basis = $120; Total FMV = $150
Each partner's outside basis: $40 (initial capital + share of taxable income)
FMV per partner: $50
Transaction: Partner A sells interest to D for $50 (FMV). PRS has §754 election in effect.
§743(b) computation:
D's outside basis: $50
D's share of inside basis: $40
§743(b) adjustment = $50 - $40 = $10 INCREASE
§755 allocation - land vs equipment vs cash classes:
Land: $90 FMV - $30 basis = $60 built-in gain
Equipment: $30 FMV - $60 basis = $30 built-in loss
Cash: $30 FMV - $30 basis = $0
Allocate $10 §743(b) adjustment based on D's 1/3 share of each property's built-in gain/loss:
D's share of land gain = $20; allocate $20 of $10 ratably
D's share of equipment loss = $10 (negative)
Net D's share of unrealized appreciation/depreciation across capital assets = $20 - $10 = $10
$10 §743(b) adjustment EXACTLY MATCHES D's net pre-acquisition appreciation
Effect on D:
D has $10 special inside basis adjustment - allocated $20 increase to land basis, $10 decrease to equipment basis (per §755 within-class FMV)
If PRS sells land for $90, partnership recognizes $60 gain; D allocated 1/3 = $20
D's §743(b) adjustment offsets gain: $20 - $20 = $0 - D pays no tax on his share of land gain that occurred before he bought in
Other partners (B, C) bear their own $20 gain shares (had basis $30, now FMV $90)
| Reporting Element | Detail |
|---|---|
| §754 election statement | Attached to Form 1065 for year of triggering event; required content per Reg §1.754-1 |
| K-1 codes | §743(b) items are reported on Schedule K-1 (Form 1065) as Box 11 code F (section 743(b) positive income adjustments), Box 13 code V (section 743(b) negative income adjustments), and Box 20 code U (section 743(b) basis adjustment) |
| Notification of transfer | Transferee partner must notify partnership within 30 days of a sale or exchange (within one year of the partner's death for a transfer on death) per Reg §1.743-1(k)(2); failure makes partnership not liable for adjustment computation |
| Partnership notification of §743(b) | Statement attached to K-1 of transferee showing amount of adjustment, allocation among assets, recovery period |
| Schedule M-2 capital account reconciliation | §743(b) adjustments do NOT affect partnership capital accounts (transferee-specific only); but tracking required |
| Form 8082 inconsistent treatment | If transferee disagrees with partnership's §743(b) computation, file Form 8082 with own return |
§743(d) post-TCJA mandates §743(b) adjustment when substantial built-in loss exists, even WITHOUT §754 election. Partnerships in net loss position must still compute and allocate adjustment for transferees - cannot avoid by simply not electing.
Pre-TCJA technical terminations under former §708(b)(1)(B) triggered automatic §743(b) refresh. Post-TCJA - REPEALED. Partnership now continues uninterrupted; no automatic basis refresh on 50% interest transfers.
§754 election is IRREVOCABLE once made; applies to ALL subsequent qualifying years. Cannot elect just for "good" years and skip "bad" years. Practitioners reflexively making annual elections waste time; once-elected remains in effect indefinitely.
Transferee must notify partnership within 30 days of a sale or exchange (within one year of the partner's death for a transfer on death) under Reg §1.743-1(k)(2). Without notification, partnership not required to compute §743(b) adjustment. Heirs particularly miss this requirement; family partnership transfers especially vulnerable.
§755 requires capital gain class vs ordinary income class allocation FIRST. Allocating $743(b) to inventory when adjustment should go to capital asset class creates incorrect future ordinary income vs capital gain character.
Transferee's §743(b) adjustment to §197 intangibles amortizable over 15 YEARS by transferee, regardless of partnership's remaining basis recovery period. Often missed - results in slower-than-allowable amortization.
Partner's death triggers §743(b) if §754 in effect. Heir gets stepped-up outside basis via §1014; without §743(b), inside basis frozen at old amount = phantom gain on partnership's eventual sale. Estate planners often miss partnership-level coordination.
Hot assets under §751(a) (unrealized receivables, substantially appreciated inventory) treated as IRD under §1014(c) - NO step-up. §743(b) adjustment to these items inappropriate; need to bifurcate hot assets from cold assets.
§734(d) - distributions with substantial basis reduction (>$250K) trigger mandatory §734(b) even without §754. Often overlooked when partnership distributes property to redeeming partner.
§734(b) affects ALL remaining partners (unlike §743(b) which is transferee-specific). Mistakenly treating §734(b) as adjustment for distributee only.
January 2025 final regs (T.D. 10028) require Form 8886 disclosure for related-party basis adjustments above $10M ($25M for transactions within the six-year lookback period), but removal was proposed March 6, 2026 and Notice 2025-23 waives §6707A penalties in the interim (the §6707A cap would otherwise be $50,000, or $10,000 for a natural person). Confirm current status before advising.
§704(c) tracks built-in gain/loss on CONTRIBUTED property; addresses contributing partner only. §743(b) tracks adjustment for INCOMING transferee. Different mechanics; tracked separately on partnership books.
Late §754 election requires Reg §1.9100-2 automatic 12-month relief OR §1.9100-3 discretionary relief via PLR. Filing late without proper procedure invalidates election.
Reg §1.754-1(c) - revocation request must be submitted to IRS no later than 30 days after close of partnership year for which revocation sought. Many practitioners miss this short window.
Multiple properties in capital gain class - §755 requires within-class FMV allocation. Allocating proportionately to historical cost instead of FMV is incorrect.
Upper-tier partnership §743(b) adjustment flows to lower-tier; Reg §1.743-1(h) requires special tracking; lower-tier separately tracks its own adjustments. Multi-tier structures particularly complex.
TCJA added second test - mandatory §743(b) if TRANSFEREE allocated loss >$250K. Even if partnership-level test fails, transferee-level test may trigger mandatory adjustment. Specially-allocated losses to specific partners particularly affected.
Primary authority: IRC §754 (Manner of electing optional adjustment to basis of partnership property). §734 (Optional adjustment to basis of undistributed partnership property). §734(a) (general rule - no adjustment unless §754 election or substantial basis reduction). §734(b) (adjustment to basis of partnership property). §734(d) (substantial basis reduction - $250,000 mandatory threshold). §743 (Special rules where section 754 election or substantial built-in loss). §743(a) (general rule - no adjustment unless §754 or substantial built-in loss). §743(b) (adjustment to basis of partnership property with respect to transferee partner). §743(b)(1) (positive adjustment - excess of basis over share). §743(b)(2) (negative adjustment - excess of share over basis). §743(c) (allocation of adjustment among partnership properties via §755). §743(d) (substantial built-in loss - TCJA mandatory adjustment thresholds; partnership-level test ($250K basis over FMV) and transferee-level test ($250K loss allocation)). §743(e) (alternative rules for electing investment partnerships). §743(f) (securitization partnerships not treated as having a substantial built-in loss). §755 (Rules for allocation of basis - capital gain class vs ordinary income class; FMV within class). §704(c) (allocations with respect to contributed property - separate from §743(b)). §708(b)(1)(B) (REPEALED by TCJA P.L. 115-97 §13504 - technical termination eliminated). §731 (extent of recognition of gain or loss on distribution). §732 (basis of distributed property other than money). §732(b) (complete liquidation distribution basis). §732(d) (special partner election - 2-year window without §754). §741 (recognition and character of gain or loss on sale or exchange of partnership interest). §751 (unrealized receivables and inventory items - hot assets). §751(a) (treatment as ordinary income on sale of partnership interest). §1014 (basis of property acquired from decedent). §1014(c) (IRD exception - hot assets not stepped up). §1.743-1 (regulations - inside basis adjustment to transferee). §1.743-1(d) (transferee's share of inside basis - previously taxed capital plus liabilities). §1.743-1(h) (multi-tier partnerships - contributions of adjusted property between upper-tier and lower-tier partnerships). §1.197-2(g)(3) (§743(b) basis increase treated as a separate §197 intangible - 15-year amortization to transferee). §1.743-1(k)(2) (transferee notification - 30 days after a sale or exchange; one year after a partner's death). §1.734-1 (regulations - §734(b) adjustments). §1.754-1 (manner of making §754 election). §1.754-1(b) (timing and content of election statement). §1.754-1(c) (revocation with IRS consent). §1.755-1 (allocation of basis adjustment among partnership properties). §1.9100-2 (automatic 12-month extension for §754 election). §1.9100-3 (discretionary relief for inadvertent failure). §6011 (general reporting requirement). §1.6011-18 (related-party basis adjustment transactions of interest - final regs January 2025 in T.D. 10028; removal proposed March 6, 2026). §6707A (penalty for failure to disclose reportable transaction - $50,000 maximum, $10,000 for a natural person, where the transaction is not a listed transaction; penalties waived under Notice 2025-23). §267(b) (related persons). §707(b)(1) (related partnerships). §7701(o) (economic substance doctrine). Tax Cuts and Jobs Act P.L. 115-97 (December 22, 2017) - §13502 added §743(d) Test 2 (transfers after December 31, 2017); §13504 repealed §708(b)(1)(B) technical termination (partnership taxable years beginning after December 31, 2017). Treasury Decision 10028 (January 14, 2025) - final regulations on related-party basis adjustment transactions of interest (removal proposed March 6, 2026). Revenue Ruling 2024-14 (IRS announced intent to challenge transactions lacking economic substance). Notice 2024-54 (proposed regulations to mechanically reduce or eliminate benefit of related-party basis adjustments; retroactive application contemplated). Otay Project LP v. Commissioner, T.C. Memo 2026-21 (February 2026) - $714 million §743(b) deduction denied on economic substance grounds; Tax Court applied Ninth Circuit framework from Sochin v. Commissioner, 843 F.2d 351 (9th Cir. 1988) and Reddam v. Commissioner, 755 F.3d 1051 (9th Cir. 2014). Form 1065 (US Return of Partnership Income). Schedule K-1 (Form 1065). Form 8082 (Notice of Inconsistent Treatment). Form 8886 (Reportable Transaction Disclosure). One Big Beautiful Bill Act P.L. 119-21 (July 4, 2025) - did NOT modify §754 / §743(b) / §734(b) framework.