SECTION 12. ORIGINAL ISSUE

DISCOUNT (§§ 1272; 1273)

.01 De minimis original issue discount (OID).

(1) Description of change and scope.

(a) Applicability . This change applies to a taxpayer that wants to change to the principal-reduction method of accounting described in section 5 of Rev. Proc. 97–39, 1997–2 C.B. 485. The principal-reduction method of accounting is an aggregate method of accounting for de minimis OID (discount) on certain loans originated by the taxpayer.

(b) Scope limitations inapplicable . A taxpayer that wants to make this change is not subject to the scope limitations in section 4.02 of this revenue procedure. However, if the taxpayer is under examination, before an appeals office, or before a federal court, the taxpayer must provide a copy of the application to the examining agent(s), appeals officer, or counsel for the government, as appropriate, at the same time that it files the copy of the application with the national office. The application must contain the name(s) and telephone number(s) of the examining agent(s), appeals officer, or counsel for the government, as appropriate.

(c) Description . The principal-reduction method of accounting is a permissible method for use by taxpayers to account for discount on one or more categories of loans described in section 4.02 or 4.03 of Rev. Proc. 97–39. If the principal-reduction method is used to account for any loans in a category of loans, the method must be used for the entire category of loans. The principal-reduction method applies only to loans described in section 3 of Rev. Proc. 97–39.

(2) Scope

(a) Applicability . This change applies to a taxpayer if all of the following conditions are satisfied:

(i) The taxpayer is a commodities dealer, securities trader, or commodities trader that has made a valid election under § 475(e) or (f) ( see section 5.02 or 5.03(1) of Rev. Proc. 99–17) and that is required to change its method of accounting to comply with the election;

(ii) The method of accounting to which the taxpayer changes is in accordance with its election under § 475(e) or (f);and

(iii) The year of change is the election year.

(b) Scope limitations inapplicable . A taxpayer making this change is not subject to the scope limitations in section 4.02 of this revenue procedure. However, if the taxpayer is under examination, before an appeals office, or before a federal court, the taxpayer must provide a copy of the application to the examining agent(s), appeals officer, or counsel for the government, as appropriate, at the same time that it files the copy of the application with the national office. The application must contain the name(s) and telephone number(s) of the examining agent(s), appeals officer, or counsel for the government, as appropriate.