SECTION 3. DEFINITIONS

.01 Timing issue. The term “timing issue” means any issue regarding the pro

June 1, 1998 14 1998–22 I.R.B.

for under the taxpayer’s inventory method. The inventoriable costs that are not covered by the agreement (that is, those costs incurred in taxable years prior and subsequent to 1995) are not affected by the resolution and thus, consistent with the taxpayer’s method of accounting, must continue to be deducted.

.04 Requirement to impose a § 481(a) adjustment. An examining agent changing a taxpayer’s method of accounting will impose a § 481(a) adjustment. The change may be made using a cut-off method only in rare and unusual circumstances when the examining agent determines that the taxpayer’s books and records do not contain sufficient information to compute the adjustment and the adjustment is not susceptible to reasonable estimation.

.05 Terms and conditions of change. An examining agent changing a taxpayer’s method of accounting will effect the change in the earliest taxable year under examination (or, if later, the first taxable year the method is considered impermissible) with a one-year § 481(a) adjustment period, subject to the computation of tax under § 481(b) (if applicable).