SECTION 5. REQUIREMENTS FOR

RELIEF

.01 A taxpayer within the scope of this revenue procedure for which any violation year ended within the look-back pe

riod is entitled to relief only if the taxpayer: (1) pays the settlement amount at the time and in the manner set forth in section 5.03 of this revenue procedure; (2) submits the accompanying memorandum at the time and in the manner set forth in sections 5.03 and 5.04 of this revenue procedure; and (3) satisfies the additional requirements set forth in section 7 of this revenue procedure. A t a x p a y e r within the scope of this revenue procedure that does not have a violation year that ends in the look-back period is automatically granted relief and is not required to satisfy any of the requirements of this revenue procedure.

.02 Settlement Amount. (1) In general. A taxpayer applying for relief under this revenue procedure must pay a “settlement amount,” which is intended to approximate the after-tax, time value of money benefit that the taxpayer will derive from continuing to use the LIFO inventory method for a period of years. The settlement amount is not treated as interest under § 163(a) and may not be capitalized or deducted under any provision of the Code. Moreover, the settlement amount is not refundable or creditable against any federal tax liability of the taxpayer.

(2) Calculating the settlement a m o u n t . The settlement amount equals 4.7% of the difference between the LIFO carrying value and the non-LIFO carrying value (for example, the value using the actual invoice cost or the first-in, first-out method) of the taxpayer’s inventory (the “LIFO reserve”) on the last day of the taxpayer’s last taxable year ended on or before October 14, 1997. For this purpose, the taxpayer’s inventory includes only inventory related to the purchase, sale, and service of automobiles and light-duty trucks. A taxpayer determines the LIFO reserve on the last day of its last taxable year ended on or before October 14, 1997, using the method of accounting that it used on its original federal income tax return for that taxable year.

.03 Time and Manner of Payment. ( 1 ) In general. The settlement amount must be paid in three equal installments. Except as provided in section 5.03(2) or (3) of this revenue procedure, the first installment and the memorandum described in section 5.04 of this revenue procedure, are due on or before May 31, 1998. The remaining installments and memoranda are due on or

before January 31 of the two succeeding calendar years. Payments, together with the original memorandum, must be sent to the Internal Revenue Service, Cincinnati Service Center, 201 W. River Center Blvd., Stop 31, Unit 21, Covington, KY 4 1 0 1 9 . A copy of each memorandum must be sent to the national office addressed to the Commissioner of Internal Revenue, A t t e ntion: CC:DOM:IT&A, P.O. Box 7604, Benjamin Franklin Station, Wa s h i n g t o n, DC 20044 (or, in the case of a private delivery service: Commissioner of Internal Revenue, Attention: CC:DOM:IT&A, 1111 Constitution Avenue, NW, Wa s h i n gton, DC 20224).

(2) Taxpayers under examination, b e f o re appeals, or before a federal court . If any federal income tax return of a taxpayer is under examination, before an appeals office, or before a federal court on October 14, 1997, the first installment of the settlement amount and the memorandum described in section 5.04 of this revenue procedure are due on or before December 1, 1997. For this purpose, the terms “under examination,” “before an appeals office,” and “before a federal court” have the same meaning as provided in Rev. Proc. 97–27, 1997–21 I.R.B. 10. The taxpayer must notify the examining agent(s), appeals off i c e r, or the counsel for the government, whichever is applicable, in writing on or before December 15, 1997, that it has applied for relief under this revenue procedure. Evidence that the first installment has been paid and a copy of the memorandum described in section 5.04 of this revenue procedure must be provided as part of this written notification.

(3) Option to pay settlement amount in one installment. A t a x p a y e r may elect to pay the entire settlement amount in one installment. If a taxpayer makes this election, the entire settlement amount and the original memorandum described in section 5.04 of this revenue procedure are due on or before May 31, 1998, or, if any federal income tax return of the taxpayer is under examination, before an appeals office, or before a federal court, on or before December 1, 1997. In addition, if applicable, the written notification required in section 5.03(2) of this revenue procedure must be satisfied. A copy of the memorandum must be sent to the national office as required by section 5.03(1) of this revenue procedure.

1997–41 I.R.B. 9 October 14, 1997

.04 Accompanying Memorandum. Each installment payment must be accompanied by a memorandum providing the following information:

(1) the taxpayer’s name, address, and EIN number;

(2) the amount of the taxpayer’s LIFO reserve calculated under section 5.02(2) of this revenue procedure; (3) the total settlement amount calculated under section 5.02(2) of this revenue procedure;

(4) the amount of the installment being paid;

(5) a statement identifying the payment as the first, second, or third installment (or a statement that the taxpayer elects to pay the entire settlement amount in a single installment); and

(6) a statement that the taxpayer agrees to all of the terms of this revenue procedure. Each memorandum must be signed under penalties of perjury by an individual with authority to bind the taxpayer in such matters. The following language must be either typed or legibly printed at the top of the first page of each memorandum: “ PAY M E N T OF SETTLEMENT A M O U N T UNDER REV. PROC. 97–44.”