SECTION 5. EFFECTIVE DATE

This revenue procedure is effective on February 20, 2001.

DRAFTING INFORMATION

The principal author of this revenue procedure is William E. Blanchard of the Office of the Associate Chief Counsel (Financial Institutions and Products). For further information regarding this revenue procedure, contact either Mr. Blanchard or Marsha A. Sabin of the Office of the Associate Chief Counsel (Financial Institutions and Products) at (202) 622–3950 (not a toll-free call).

.02 Stated interest on short-term loans of cash method banks .

(1) Description of change and scope .

(a) Applicability . This change applies to a bank that uses the cash receipts and disbursements method of accounting as its overall accounting method and that wants to change its method of accounting from accruing stated interest on shortterm loans made in the ordinary course of business to using the cash method for that interest. For example, see Security State Bank v. Commissioner, 214 F.3d 1254 (10th Cir. 2000), aff ’g 111 T.C. 210 (1998), acq., 2001–5 I.R.B., and Security Bank Minnesota v. Commissioner, 994 F.2d 432 (8th Cir. 1993), aff’g 98 T.C. 33 (1992), in which the courts held that § 1281 does not apply to short-term loans made by a cash method bank in the ordinary course of its business.

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.

(2) Change for prior taxable years . A taxpayer is permitted to make the change in accounting method described in section 13.02(1)(a) of this Appendix for any taxable year ending before December 31, 2000, provided the year is not barred by the statute of limitations, there is no closed taxable year after the year of change, and the taxpayer complies with the following requirements:

(a) the taxpayer must attach a completed Form 3115 to an amended return for the year of change, and must file, on or before December 31, 2001, that amended return and amended returns for all subsequent affected taxable years, if any; and

(b) the taxpayer must file a copy of the Form 3115 with the national office

(b) Scope limitations inapplicable . A taxpayer that wants to make this change

March 19, 2001 914 2001–12 I.R.B.