Part II—Information for All Requests

Line 4. If no, check “No.” If yes, check “Yes” and attach a statement explaining why the applicant is eligible to change its accounting method. For example, specific guidance may permit an applicant to change its method of accounting in its final tax year. See section 5.03(2) of Rev. Proc. 2015-13 and sections 6.01 (DCN 7) and 6.07 (DCN 107) of Rev. Proc. 2022-14, or any successor.

Ordinarily, the IRS will not consent to a request for an accounting method change when an applicant ceases to engage in the trade or business or terminates its existence. Generally, an applicant is considered to cease to engage in a trade or business if the applicant terminates its existence for federal income tax purposes, ceases operation of the trade or business, or transfers substantially all the assets of the trade to another taxpayer. For example, a cessation of a trade or business occurs when a trade or business is incorporated or the assets of the trade or business are contributed to a partnership. See sections 3.04, 5.01, and 5.03 of Rev. Proc. 2015-13.

Line 5. When an acquiring corporation operates the trades or businesses of the parties as separate and distinct trades or businesses after the date of distribution or transfer, the acquiring corporation must use a carryover method. See Regulations sections 1.381(c)(4)-1(a)(2) and 1.381(c)(5)-1(a)(2). On the other hand, when the acquiring corporation does not operate the trades or businesses of the parties as separate and distinct trades or businesses after the date of distribution or transfer, the acquiring corporation will generally use the principal method. The applicant does not need to secure the Commissioner's consent to use the principal method. See Regulations sections 1.381(c)(4)-1(d)(1) and 1.381(c)(5)-1(d)(1).

Line 6a. Generally, the applicant is under examination with respect to a federal income tax return as of the date the applicant (or filer) is contacted in any manner by a representative of the IRS for the purpose of scheduling or conducting any type of examination of the return. See section 3.18 of Rev. Proc. 2015-13.

Line 6b. Generally, the applicant's accounting method is an issue under consideration if the examining agent has given the applicant (or filer) written notification specifically citing the treatment of the item as an issue under consideration. If an examining agent does not propose an adjustment for the item that is an issue under consideration during the examination, the item continues to be an issue under consideration after the examination ends only if the issue is placed in suspense. The applicant's accounting method is an issue placed in suspense if the examining agent has given the applicant (or filer) written notification of the IRS's intent to examine the issue during the examination of the subsequent tax year(s) to be examined. See section 3.08 of Rev. Proc. 2015-13. A partnership or an S corporation has an issue under consideration before examination if the same item is an issue under consideration in an examination of a partner’s, member’s, or shareholder's federal income tax return. For consolidated groups, see section 3.08 of Rev. Proc. 2015-13 for issue under consideration rules.

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