SECTION 7. ADDITIONAL TERMS OF

RELIEF

.01 A taxpayer that fails to pay each installment of the settlement amount t i m e l y, or to submit the memorandum t i m e l y, has not satisfied the requirements of this revenue procedure. A cc o r d i n g l y, the relief provided under section 4 of this revenue procedure is not a v a i l a b l e .

.02 A taxpayer that ceases to engage in the trade or business of purchase, sale, and service of automobiles or light-duty trucks or terminates its existence must pay the remaining balance of the settlement amount within 45 days of the cessation or termination. A taxpayer is treated as ceasing to engage in a trade or business if the operations of the trade or business cease, or substantially all the assets of the trade or business are transferred to another taxpayer in a taxable or non-taxable transfer. For this purpose, “substantially all” has the same meaning as in section 3.01 of Rev. Proc. 77–37, 1977–2 C.B. 568. No acceleration of the settlement amount is required under this section 7.02 when a C corporation elects to be treated as an S corporation, or an S corporation terminates its S election and is then treated as a C corporation. Howe v e r, acceleration of the settlement amount is required if a sole proprietor incorporates and immediately elects to be treated as an S corporation.

.03 A taxpayer that makes one or more payments under this revenue procedure may not change from the LIFO inventory method pursuant to Rev. Proc. 97–37, 1997–33 I.R.B. 18, for a taxable year beginning before the date that the entire settlement amount is paid in accordance with this revenue procedure. A taxpayer requesting to change from the LIFO method for a taxable year beginning before the date that the entire settlement amount is paid, must file a Form 3115 in accordance with Rev. Proc. 97–27. The Commissioner will not grant consent to change from the LIFO method unless the taxpayer agrees to accelerate any remaining payments of the settlement amount.