1. Introduction: What is Form 15254?

IRS Form 15254, officially titled Request for Section 754 Revocation, is an administrative application form published by the Internal Revenue Service (IRS). It is governed by the Small Business/Self-Employed (SB/SE) and Large Business & International (LB&I) Divisions of the IRS under Treasury Regulation Section 1.754-1(c) and Internal Revenue Code (IRC) Section 754.

This form is used by partnerships and limited liability companies (LLCs) taxed as partnerships that previously made a Section 754 election to adjust the inside basis of partnership assets. Because an election under Section 754 is legally binding for all future tax years, a partnership cannot cancel it unilaterally. Form 15254 serves as the official petition to the IRS requesting formal permission to revoke the election and stop calculating mandatory basis adjustments.

2. Purpose of the Form: Why Does Form 15254 Exist?

When a partnership makes a Section 754 election, it allows the partnership to adjust the tax basis of its internal property under Section 743(b) (when a partner sells their interest or passes away) or under Section 734(b) (when property is distributed to a partner). While this election provides valuable tax deductions when assets appreciate, it also requires mandatory downward basis adjustments (step-downs) when assets decline in value, along with substantial ongoing accounting costs.

Historically, partnerships could easily terminate a Section 754 election through a “technical termination” when 50% or more of partnership interests changed hands within 12 months. However, the Tax Cuts and Jobs Act (TCJA) of 2017 repealed technical terminations, leaving partnerships permanently locked into their 754 elections. Form 15254 exists to provide an orderly, standardized administrative process to escape this requirement:

Standardizing the Revocation Process: Prior to Form 15254, partnerships had to submit informal written letters. Form 15254 provides a uniform application that captures all factual and legal data required by Treasury regulations.
Relieving Undue Administrative Burdens: It allows partnerships to establish valid business reasons—such as a major change in business operations, a substantial increase in assets, or frequent ownership turnover—that make maintaining basis adjustments overly burdensome.
Enforcing Statutory Anti-Abuse Rules: Under Treasury Regulation Section 1.754-1(c), the IRS is prohibited from approving a revocation if the primary purpose is to avoid stepping down (reducing) the basis of partnership assets. Form 15254 screens for improper tax avoidance.

3. Who Needs to File This Form?

Form 15254 is an entity-level filing used exclusively by partnerships that wish to terminate an active Section 754 election. You need to file Form 15254 if:

Your partnership or multi-member LLC previously filed a valid Section 754 election with Form 1065 for a prior tax year.
The partnership wants to revoke the election so that future transfers of partnership interests or property distributions will no longer trigger mandatory basis adjustments under Sections 734(b) and 743(b).
The partnership can substantiate an increased administrative burden under Treasury Regulation Section 1.754-1(c).
The request is signed by one of the partners or the authorized Partnership Representative (PR).

4. Who Is Exempt / Not Required to File?

Large categories of businesses and partnerships have no reason to use Form 15254:

Partnerships That Never Made a Section 754 Election: If your partnership never attached an election statement to Form 1065, no election exists, and no revocation is needed.
Partnerships Making an Initial Election: If you are seeking to make a new Section 754 election, do not file Form 15254. An initial election is made by attaching a statement to a timely filed Form 1065 under Treasury Regulation Section 1.754-1(b).
Single-Member LLCs and Corporations: Sole proprietorships, C corporations, and S corporations do not operate under Subchapter K partnership rules and cannot file this form.
Partnerships Seeking to Avoid a Step-Down in Basis: If your primary reason for seeking revocation is that assets have lost value and you want to prevent a negative basis adjustment, the IRS will reject the application by law.
Individual Partners: Individual investors or partners do not file Form 15254; the application must be executed on behalf of the partnership entity.

5. When to File: Deadlines and Frequency

Form 15254 is an event-based application with one of the strictest deadlines in the Internal Revenue Code. It is not filed with your regular Form 1065 tax return.

Under Treasury Regulation Section 1.754-1(c), Form 15254 must be filed no later than 30 calendar days after the close of the partnership taxable year with respect to which the revocation is intended to take effect. For example, if a calendar-year partnership (tax year ending December 31, 2025) wishes to revoke its election effective for the 2025 tax year, Form 15254 must be filed by January 30, 2026. Missing this 30-day post-year-end window is fatal: late filings are rejected unless the partnership pays a significant user fee to request private letter ruling relief under Treasury Regulation Section 301.9100-3.

6. Where and How to File

Form 15254 cannot be submitted electronically through standard tax software. It must be prepared on paper and submitted directly to the IRS:

Submission by Mail: The completed Form 15254, signed by a partner or Partnership Representative, must be mailed to the designated IRS Submission Processing Center where the partnership files its Form 1065, using the designated IRS address as per instructions for Form 1065 (typically the IRS Center in Ogden, Utah).
Separate from Form 1065: Do not attach Form 15254 to your annual Form 1065 tax return. Because the return is due months after the 30-day revocation deadline, attaching it to Form 1065 makes the request automatically late.
Certified Mail Recommended: Always mail Form 15254 via certified mail with return receipt requested to prove it was postmarked within 30 days of the partnership’s year-end.
IRS Determination Letter: The IRS evaluates the request and issues Letter 6297 formally approving or denying the revocation.

7. Step-by-Step Instructions to Fill Form 15254

Form 15254 requires detailed background information about the original election, the business justification for revocation, and anti-abuse certifications. The table below outlines each section of the form.

Section	Field / Topic	Required Information & Legal Standard
Header	Partnership Details	Full legal partnership name, Employer Identification Number (EIN), address, and contact partner info.
Part I	Election History	Tax year the Section 754 election was originally made and the tax year revocation is to take effect.
Part II	Grounds for Revocation	Checkboxes and narrative detailing increased administrative burden under Treas. Reg. 1.754-1(c).
Part III	Anti-Abuse Certification	Affirmation that revocation is not primarily intended to avoid stepping down asset basis.
Part IV	Partner Execution	Original signature of a partner or BBA Partnership Representative, title, and date.

Part I: Partnership Information and Election History

Enter the complete legal name of the partnership as shown on Form 1065, its nine-digit Employer Identification Number (EIN), and current business mailing address. Provide the name, title, and telephone number of the contact partner or representative. In the election history block, enter the exact tax year the Section 754 election originally became effective and the specific tax year for which you want the revocation to take effect.

Part II: Grounds for Requesting Revocation

Treasury Regulation Section 1.754-1(c) requires the partnership to state valid business grounds for revocation. You must select and explain one or more of the approved statutory categories:

Change in the Nature of the Partnership Business: The partnership shifted its core commercial operations (e.g., transitioning from active real estate development to passive equipment leasing).
Substantial Increase in Partnership Assets: Rapid expansion has made tracking individual Section 743(b) tiers across thousands of assets mathematically impractical.
Change in the Character of Partnership Assets: Assets shifted from depreciable tangible property to non-depreciable securities or cash.
Increased Frequency of Shifts in Partnership Interests: High turnover of partner interests (such as frequent retirements, partner admissions, or secondary sales) creates an overwhelming accounting burden.

Part III: Anti-Abuse Demonstration and Asset Disclosure

The IRS will reject any application if the primary purpose is to avoid a reduction in the basis of assets. You must provide a statement confirming that recent or upcoming property distributions or interest transfers would not result in a significant negative basis adjustment under Section 734(b) or Section 743(b). You should attach balance sheets and asset schedules showing that asset values exceed their tax basis.

Part IV: Signature and Authorization

Under federal regulations, Form 15254 may be signed by any one of the partners or by the designated Partnership Representative (PR) under the BBA audit rules. The signer must print their legal name, official title (e.g., General Partner, Managing Member, or Partnership Representative), and date the form.

8. Required Documents and Information Needed Before Filling

Before preparing Form 15254, assemble the following partnership and accounting files:

A copy of the original Form 1065 and the Section 754 election statement showing the year the election was adopted.
Recent balance sheets, asset depreciation ledgers, and appraisals showing current asset values and tax basis.
A detailed written statement explaining the exact administrative burden caused by continuing the election.
Records of recent partner transfers, sales of units, or property distributions over the past three tax years.
A signed Form 2848 (Power of Attorney) if a CPA or tax attorney represents the partnership.

9. Common Mistakes to Avoid

Failing to follow IRS rules can cause your revocation request to be rejected, leaving the partnership permanently burdened. Watch out for these frequent mistakes:

Missing the 30-Day Post-Year-End Deadline: Waiting to file Form 15254 when you file Form 1065 in March or September is the most common and fatal mistake. The application must be filed within 30 days of the close of the tax year (by January 30 for calendar-year partnerships).
Applying to Avoid a Step-Down in Basis: If the partnership holds depreciated assets and seeks revocation to avoid reducing asset basis upon a partner’s death or transfer, the IRS will deny the request under Treasury Regulation Section 1.754-1(c).
Failing to Provide a Specific Administrative Rationale: Submitting a generic statement like “it is too expensive” without documenting a change in business nature, asset volume, or partner turnover will result in denial.
Assuming Revocation Is Automatic: Mailing Form 15254 does not revoke the election. You must continue making basis adjustments until the IRS issues an official approval letter (Letter 6297).
Forgetting Mandatory Substantial Built-In Loss Rules: Even if the IRS revokes your Section 754 election, federal law still mandates basis step-downs under Sections 743(d) and 734(d) if there is a substantial built-in loss (exceeding $250,000) upon a transfer or distribution.

10. Penalties for Non-Filing or Errors

Form 15254 is a formal permission request, so there are no direct fines for not filing it. However, the tax and accounting consequences of mishandling the form are severe:

Enforced Basis Adjustments: If you stop calculating Section 743(b) or 734(b) adjustments without an approved Letter 6297, the IRS will audit the partnership, disallow partner depreciation deductions, and reallocate capital gains.
Understatement Penalties: Miscalculating partner tax basis by ignoring an active Section 754 election can trigger a 20% accuracy-related penalty under Section 6662.
Expensive Ruling Fees for Late Filings: If you miss the 30-day deadline, the only way to obtain revocation relief is by requesting a formal Private Letter Ruling (PLR) under Treasury Regulation Section 301.9100-3, which costs tens of thousands of dollars in IRS user fees and legal expenses.
Perjury Liabilities: Falsifying asset values or concealing intended basis reductions on Form 15254 is a federal crime punishable under 26 U.S.C. Section 7206.

11. Related Forms or Schedules

Form 15254 operates within an interconnected system of federal partnership taxation forms:

Form 1065: U.S. Return of Partnership Income (Schedule B questions govern Section 754 status).
Schedule K-1 (Form 1065): Partner’s Share of Income, Deductions, Credits, etc. (Box 20 Code U reports Section 743(b) basis adjustments).
Form 8082: Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR).
Form 15288: Request to Revoke Partnership Election under IRC Section 6221(b).
IRS Letter 6297: Section 754 Revocation Request Determination (the official IRS approval or denial notice).
Form 2848: Power of Attorney and Declaration of Representative.

12. Frequently Asked Questions (FAQs)

1. Why is a Section 754 election so difficult to revoke?

Congress designed Section 754 to prevent partnerships from “cherry-picking” tax benefits—stepping up asset basis when values rise, but avoiding step-downs when values fall. To protect federal revenue, an election is permanent and can only be revoked with explicit IRS approval.

2. What is the exact deadline to file Form 15254?

Under Treasury Regulation Section 1.754-1(c), Form 15254 must be filed no later than 30 calendar days after the close of the partnership tax year for which the revocation is intended to take effect (January 30 for calendar-year filers).

3. What reasons will the IRS accept to approve a revocation?

The IRS typically approves revocations that result from an increased administrative burden, including: (1) a change in the nature of the partnership business, (2) a substantial increase in assets, (3) a change in the character of assets, or (4) increased frequency of partner shifts and retirements.

4. Can the IRS deny our request if we want to avoid a negative basis adjustment?

Yes. Treasury Regulation Section 1.754-1(c) explicitly states that no application for revocation shall be approved if the primary purpose is to avoid stepping down the basis of partnership assets upon a transfer or distribution.

5. Can we stop making basis adjustments as soon as we mail Form 15254?

No. The election remains in full legal effect until the IRS issues an official written approval via Letter 6297. You must continue making required basis adjustments on Form 1065 until approval is received.

6. Who has the authority to sign Form 15254?

Under Treasury regulations, Form 15254 may be signed by any one of the partners, or by the designated Partnership Representative (PR) under the BBA centralized audit regime.

13. Conclusion: Key Takeaways

IRS Form 15254 is the essential legal gateway for partnerships seeking relief from the ongoing complexities and accounting costs of an active Section 754 election. Following the repeal of technical terminations under the Tax Cuts and Jobs Act, Form 15254 represents the only standard administrative procedure to revoke an election with IRS consent.

Because the form must be filed within 30 days of the partnership’s year-end and strictly requires proving an administrative burden without avoiding basis step-downs, general partners and managing members should review their asset ledgers in December, prepare Form 15254 immediately, and work closely with an experienced partnership tax CPA or attorney.

IRS Form 15254 Guide: Request for Section 754 Revocation