Automatic Accounting Method Change Procedures Modified

By Alistair M. Nevius, J.D.

The IRS has modified the procedures for obtaining automatic consent to change an accounting method. Rev. Proc. 2009-39 amplifies, modifies, and clarifies various earlier pieces of guidance that had established the general procedures for taxpayers to secure advance IRS consent to an accounting method change.

Last year, the IRS released comprehensive accounting method change guidance in the form of Rev. Proc. 2008-52. The new revenue procedure contains various amendments to that guidance. It addresses:

  • When a method change requires a Sec. 481(a) adjustment;
  • When an IRS examination is considered to have begun (“on the date the taxpayer is contacted in any manner by a representative” of the IRS);
  • When a taxpayer is considered to be under examination;
  • When a taxpayer under examination can apply for an accounting method change; and
  • When a taxpayer can file a single application for two or more accounting method changes.

The revenue procedure addresses how a taxpayer can change its method of accounting from capitalizing repair or maintenance costs under Sec. 263(a) to treating them as deductible business expenses. It also discusses:

  • Accounting for tenant construction allowances;
  • Dispositions of building structural components and other tangible depreciable assets;
  • Certain uniform capitalization methods used by resellers and producers;
  • Timing of incurring various legal liabilities;
  • Changes in the inventory price index method; and
  • Changes to dollar-value pools of manufacturers.

The revenue procedure is generally effective for Forms 3115, Application for Change in Accounting Method, filed on or after August 27, 2009.

Newsletter Articles

AWARD

James M. Greenwell Wins 2014 Best Article Award

The winner of The Tax Adviser’s 2014 Best Article Award is James M. Greenwell, CPA, MST, a senior tax specialist–partnerships with Phillips 66 in Bartlesville, Okla., for his article, “Partnership Capital Account Revaluations: An In-Depth Look at Sec. 704(c) Allocations.”

 

FEATURE

How Legal Marijuana Businesses Are Treated Federally

This article examines the tax problems that these businesses face and warns that professionals may provide services to them at their peril.