SECTION 4. PROCEDURE

.01 In General. A change to the installment method of accounting under § 453 for DPS contracts for AMT purposes is made on a cut-off basis either prospectively, beginning with the current taxable year (generally, the 1998 taxable year), or retroactively, beginning with an earlier taxable year by filing amended returns. No Form 3115 is required to be filed. For further information in preparing 1998 returns, and amended returns, see Publication 225, Farmer’s Tax Guide.

.02 Prospective Change. To make the change in method of accounting prospectively, the installment method is used to report income from

DPS contracts entered into in the current taxable year and all subsequent taxable years for AMT purposes if such method is used for the contract for regular tax purposes. No AMT adjustment should be made for these contracts related to the use of the installment method. Any amount of income from a DPS contract entered into prior to the year of change (i.e. prior to the current taxable year) 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. Taxpayers who made a prospective change in method of accounting for DPS contracts in 1997 are deemed to have complied with the requirements of this section 4.02.

.03 Retroactive Change. To make the change in method of accounting retroactively, amended returns must be filed for any earlier open taxable year that the taxpayer selects after which there is no closed taxable year and all affected subsequent taxable years for which a return has been filed. An entity (including a limited liability company) treated as a partnership or an S corporation for federal income tax purposes (“passthrough entity”) may not file an amended return for any taxable year ending prior to the beginning of the earliest open taxable year of its partners, members, or shareholders after which there is no closed taxable year. The installment method must be used to report income from DPS contracts entered into in the year of change (i.e. the earliest taxable year for which an amended return is filed), and for all subsequent taxable years for AMT purposes if such method is used for the contract for

December 7, 1998 20 1998–49 I.R.B.