SECTION 2. BACKGROUND

.01 Section 446 (e) and § 1.446–1(e) state that, except as otherwise provided, a taxpayer must secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. Section 1.446–1(e)(2)(i) of the Income Tax regulations provides that the taxpayer must secure such consent whether or not the method is proper or permitted under the Code or regulations. While such consent is ordinarily obtained by filing Form 3115, Application for Change in Accounting Method, § 1.446– 1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions necessary to obtain the Commissioner’s consent to change the taxpayer’s method of accounting.

1998–49 I.R.B. 19 December 7, 1998

regular tax purposes. The installment method may not be used to report income from DPS contracts entered into prior to the year of change for AMT purposes. Any amount of income from a DPS contract entered into prior to the year of change that was reported in a prior taxable year for AMT purposes, must be reflected as a negative AMT adjustment in the taxable year that amount of income is reported for regular tax purposes. Additionally, the minimum tax credit, if any, reported on Form 8801, for the amended return years must be recalculated. Passthrough entities must reflect all adjustments on the Schedule K-1 issued to partners, members, or shareholders.