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Hohum77, thanks for the link. The wikipedia article is interesting and helpful in terms of understanding what Section 754 is about and why it might be used. However, I have Googled extensively and not yet found anything that addresses what a limited partner is required to do in this regard in terms of whether the 754 statement is still mandatory.

Here is the relevant info in the TEPPCO Partners' K-1 instructions:

Required IRC Section 754 statement for acquisition of units:

The Partnership has made the election, provided under Internal Revenue Code (IRC) Section 754, to adjust the basis of Partnership property for transfers of Partnership interests. The election applies to unitholders who acquired their units by purchase or by inheritance. Unless otherwise notified by you or by your broker, the Partnership has assumed that any acquisition of units reported on your Ownership Schedule was made by purchase or inheritance.

The general effect of such an election is that upon acquisition of a Partnership unit, a unitholder is entitled to an adjustment to his share of Partnership property to reflect the price at which the unit was purchased or inherited. An election under IRC Section 754 permits an investor to claim depreciation deductions to the extent that any basis adjustment is allocated to depreciable property. The Partnership has adjusted 2007 tax information for the IRC Section 754 election based on unit trading prices for the calendar month in which your acquisition was recorded.

If you acquired your units by purchase or by inheritance, you must include the IRC Section 754 Statement stated below in your income tax return for the first year you become a partner.
(Emphasis added by me.)

Here is the statement that TEPPCO Partners says to use:


The taxpayer is a transferee partner in TEPPCO Partners, L.P. who has a special basis adjustment under Internal Revenue Code (IRC) Section 743(b) pursuant to the IRC Section 754 election made by TEPPCO Partners, L.P. The special basis adjustment was made in accordance with the rules provided in IRC Sections 743 and 755 and the Regulations thereunder. Detailed information is available in the office of TEPPCO’s General Partner upon request.

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