SECTION 4. MONTHLY CLOSING

ELECTION AND CONSENT

.01 Effect of Election and Consent . If, at the end of any calendar month, an eligible partnership has a Monthly Closing Election in effect and one or more eligible partners of the partnership has a Monthly Closing Consent in effect, then, with respect to each such partner, the partnership must close its books as described in § 1.706 1(c)(2) of the Income Tax Regulations as if the partner

had sold its entire interest in the partnership on the last day of that month. The partner must include in its taxable income for that month the partner’s distributive share of items described in § 702(a) earned by the partnership since the last closing of the books with respect to that partner and any guaranteed payments under § 707(c) to the partner that are deductible by the partnership since the last closing of the books with respect to that partner. If the partner is on a 52–53 week taxable year, then the provisions of § 1.441–2T(e) apply as if the last day of the month was the last day of the partnership’s taxable year.

.02 Reporting Requirements . In connection with this monthly closing of the books, the partnership must provide each consenting eligible partner information with respect to the partner’s distributive share of items described in § 702(a) and any guaranteed payments under § 707(c). To satisfy this requirement, the partnership may use a Schedule K-1 (Form 1065), Partner’s Share of Income, Cred- its, Deductions, etc., or any other document or electronic communication that provides substantially equivalent information (monthly statements). The partnership and each consenting eligible partner must maintain the monthly statements but should not file them with the Service. At the end of its taxable year the partnership must provide a single Schedule K-1 (Form 1065) to each of its partners (both the consenting and the nonconsenting partners). In the case of a consenting eligible partner, this single annual Schedule K-1 must include all amounts shown on the monthly statements issued to the partner.