SECTION 5. TERMS AND

CONDITIONS OF CHANGE

.01 In general . A change in annual accounting period filed under this revenue procedure must be made pursuant to the terms and conditions provided in this revenue procedure.

.02 Short period . The short period required to effect the change of annual accounting period must begin with the day following the close of the old taxable year and end with the day preceding the first

2000–3 I.R.B. 311 January 18, 2000

day of the new taxable year.

.03 Short period tax return . The corporation or consolidated group must file a federal income tax return for the short period by the due date of that return, including extensions pursuant to § 1.443–1(a). The corporation’s taxable income (or the consolidated group’s consolidated taxable income) for the short period must be annualized, except in the case of a RIC or a REIT, and the tax must be computed in accordance with the provisions of §§ 443(b) and 1.443–1(b). However, for changes to or from a 52-53-week taxable year, see special rules in § 1.441–2T(c)(5). .04 Subsequent year tax returns . Returns for subsequent taxable years must be made on the basis of a full 12 months (or on a 5253-week basis) ending on the last day of the new taxable year, unless the corporation or consolidated group secures the approval of the Commissioner to change its new taxable year.

.05 Book conformity . The books of the corporation or consolidated group must be closed as of the last day of the new taxable year. The corporation or consolidated group must compute its income and keep its books and records (including financial statements and reports to creditors) on the basis of the new taxable year.

.06 Net operating losses . If the corporation (or consolidated group) has a NOL (or consolidated NOL) in the short period required to effect the change, the NOL may not be carried back but must be carried over in accordance with the provisions of § 172 beginning with the first taxable year after the short period. However, the short period NOL (or consolidated NOL) is carried back or carried over in accordance with § 172 if it is either: (a) $50,000 or less, or (b) results from a short period of 9 months or longer and is less than the NOL (or the consolidated NOL) for a full 12-month period beginning with the first day of the short period.

.07 General business credits . If there is an unused general business credit or any other unused credit for the short period, the corporation or consolidated group must carry that unused credit forward. An unused credit from the short period may not be carried back.

.08 Concurrent change for related enti- ties . If a corporation’s interest in a pass

through entity, FSC, IC-DISC, CFC, or FPHC is disregarded pursuant to sections 4.02(2)(a), 4.02(3)(a), or 4.02(8) of this revenue procedure because the entity is required to change its taxable year to the corporation’s new taxable year, the entity must change its taxable year concurrently with the corporation’s change in taxable year, notwithstanding the testing date provisions in §§ 706(b)(4)(A)(ii) and 898(c)(1)(C)(ii).