SECTION 12. ORIGINAL ISSUE

DISCOUNT (§§ 1272; 1273) . . . . . . 155

when electing S corporation status . . . . . . . . . . . . . . . . .154 .02 Reserved . . . . . . . . . . . . . . . .155

account . . . . . . . . . . . . . . . .130 .05 Cooperative advertising . . . .131

(1) Description of change

and scope . . . . . . . . . . . . . .131 (2) Scope limitations

used vehicles purchased or taken as a trade-in . . . . . . . . .142 (1) Description of change

and scope . . . . . . . . . . . . . .142 (2) Manner of making

inapplicable . . . . . . . . . . . .131

the change . . . . . . . . . . . . .143 .03 Alternative LIFO inventory method

for retail automobile dealers . .143 (1) Description of change

and scope . . . . . . . . . . . . . .143 (2) Manner of making

.01 De minimis original issue

discount (OID) . . . . . . . . . . . .155 (1) Description of change

and scope . . . . . . . . . . . . . .155 (2) Manner of making

SECTION 8A. CERTAIN PAYMENTS FOR THE USE OF PROPERTY OR SERVICES (§ 467) . . . . . . . . . . . . . . 132

.01 Change to constant rental

accrual method. . . . . . . . . . . .132 (1) Description of change. . . . .132 (2) Requirements. . . . . . . . . . . .132 (3) Scope limitations

the change . . . . . . . . . . . . .144 .04 Inventory price index computation

the change . . . . . . . . . . . . .156 (3) Additional requirements . . .156 (4) No audit protection . . . . . .157 .02 Pool of debt instruments . . . .157

(1) Description of change

and scope . . . . . . . . . . . . . .157 (2) Additional requirements . . .160

inapplicable. . . . . . . . . . . . .132 .02 Change to comply with §§ 1.467–1

(IPIC) method under the LIFO inventory method . . . . .145 (1) Description of change

and scope . . . . . . . . . . . . . .145 (2) Manner of making

through 1.467–7. . . . . . . . . . .133 (1) Description of change. . . . .133 (2) Requirements . . . . . . . . . . .133 (3) Scope limitations

inapplicable. . . . . . . . . . . . .133 (4) Manner of making

the change . . . . . . . . . . . . .147 (3) Bargain purchase . . . . . . . .147 .05 Determining current-year

SECTION 12A. MARKET DISCOUNT BONDS (§ 1278) . . . . . . . . . . . . . . . . 160

.01 Revocation of § 1278(b)

the change. . . . . . . . . . . . . .133 .03 Change to comply with regulation

project IA–292–84. . . . . . . . .134 (1) Description of

the change. . . . . . . . . . . . . .134 (2) Requirements. . . . . . . . . . . .134 (3) Scope limitations

cost under the LIFO inventory method . . . . . . . . . .148 (1) Description of change

and scope . . . . . . . . . . . . . .148 (2) Manner of making

the change . . . . . . . . . . . . .149

election . . . . . . . . . . . . . . . . .160 (1) Description of change

and scope . . . . . . . . . . . . . .160 (2) Revocation of election . . . .160 (3) Manner of making

the change . . . . . . . . . . . . .161 (4) Additional requirements . . .161 (5) Audit protection . . . . . . . . .162 .02 Reserved . . . . . . . . . . . . . . . .1 62

inapplicable. . . . . . . . . . . . .134

SECTION 10A. MARK-TO-MARKET ACCOUNTING METHOD FOR DEALERS IN SECURITIES (§ 475) . . . . . . . . . . . . . . . . . . . . . . . . 149

1999–52 I.R.B. 727 December 27, 1999

Accounting Method, during the taxable year in which the taxpayer wants to make the proposed change.

.03 Terms and conditions of a method change. Section 1.446–1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions deemed necessary to permit a taxpayer to obtain consent to change a method of accounting in accordance with § 446(e). The terms and conditions the Commissioner may prescribe include the year of change, whether the change is to be made with a § 481(a) adjustment or on a cut-off basis, and the § 481(a) adjustment period.

.04 No retroactive method change. Unless specifically authorized by the Commissioner, a taxpayer may not request, or otherwise make, a retroactive change in method of accounting, regardless of whether the change is from a permissible or an impermissible method. See generally Rev. Rul. 90–38.

.05 Method change with a § 481(a) adjustment.

(1) Need for adjustment . Section 481(a) requires those adjustments necessary to prevent amounts from being duplicated or omitted to be taken into account when the taxpayer’s taxable income is computed under a method of accounting different from the method used to compute taxable income for the preceding taxable year. When there is a change in method of accounting to which § 481(a) is applied, income for the taxable year preceding the year of change must be determined under the method of accounting that was then employed, and income for the year of change and the following taxable years must be determined under the new method of accounting as if the new method had always been used.

Example. A taxpayer that is not required to use inventories uses the overall cash receipts and disbursements method and changes to an overall accrual method. The taxpayer has $120,000 of income earned but not yet received (accounts receivable) and $100,000 of expenses incurred but not yet paid (accounts payable) as of the end of the taxable year preceding the year of change. A positive § 481(a) adjustment of $20,000 ($120,000 accounts receivable less $100,000 accounts payable) is required as a result of the change.

(2) Adjustment period. Section 481(c) and §§ 1.446–1(e)(3)(ii) and 1.481–4 provide that the adjustment required by § 481(a) may be taken into account in determining taxable income in