Part I. Rulings — Internal Revenue Bulletin 2002-18

Section 162.—Trade or Business Expenses

26 CFR 1.162–1: Cost of materials.

Qualifying small business taxpayers with average annual gross receipts of $10,000,000 or less are excepted from the requirement to account for inventories under § 471 for eligible trades or businesses, but may account for inventoriable items as materials and supplies that are not incidental under § 1.162–3. See Rev. Proc. 2002–28, page 815.

Section 263A.—Capitalization and Inclusion in Inventory Costs of Certain Expenses

26 CFR 1.263A–1: Uniform capitalization of costs.

For eligible trades or businesses, inventoriable items of qualifying small business taxpayers with average annual gross receipts of $10,000,000 or less are not subject to § 263A, but may be treated as materials and supplies that are not incidental under § 1.162–3. See Rev. Proc. 2002–28, page 815.

Section 446.—General Rule for Methods of Accounting

26 CFR 1.446–1: General rule for methods of accounting.

Qualifying small business taxpayers with average annual gross receipts of $10,000,000 or less are excepted from the requirements to use an accrual method of accounting under § 446 and to account for inventories under § 471 for eligible trades or businesses. See Rev. Proc. 2002–28, page 815.

Section 447.—Method of Accounting for Corporations Engaged in Farming

Taxpayers that are required to use the accrual method of accounting under § 447 are not “qualifying small business taxpayers” that are excepted from the requirements to use an accrual method of accounting under § 446 and to account for inventories under § 471. See Rev. Proc. 2002–28, page 815.

Section 448.—Limitation on Use of Cash Method of Accounting

26 CFR 1.448–1T: Limitations on the use of the cash receipts and disbursements method of account- ing.

Taxpayers that are required to use the accrual method of accounting under § 448 are not “qualifying small business taxpayers” that are excepted from the requirements to use an accrual method of accounting under § 446 and to account for inventories under § 471. See Rev. Proc. 2002–28, page 815.

Section 460.—Special Rules for Long-Term Contracts

26 CFR 1.460–1: Long-term contracts.

Under § 460, qualifying small business taxpayers with average annual gross receipts of $10,000,000 or less that are excepted from the requirements to use an accrual method of accounting under § 446 and to account for inventories under § 471 for eligible trades or businesses may be required to account for certain items using a longterm contract method. See Rev. Proc. 2002–28, page 815.

Section 471.—General Rule for Inventories

26 CFR 1.471–1: Need for inventories.

Section 481.—Adjustments Required for Changes in Method of Accounting

26 CFR 1.481–1: Adjustments in general. 26 CFR 1.481–4: Adjustments taken into account with consent.

For eligible trades or businesses, qualifying small business taxpayers with average annual gross receipts of $10,000,000 or less may obtain automatic consent to change to the cash receipts and disbursements method of accounting and to account for inventoriable items as materials and supplies that are not incidental under § 1.162–3. See Rev. Proc. 2002–28, page 815.

Section 1001.—Determin- ation of Amount of and Recognition of Gain or Loss

26 CFR 1.1001–1: Computation of gain or loss.

Notwithstanding § 1001 and the regulations thereunder, qualifying small business taxpayers that are excepted from the requirements to use an accrual method of accounting under § 446 of the Code and to account for inventories under § 471 for eligible trades or businesses will include amounts attributable to open accounts receivable (due in 120 days or less) in income as the amounts are actually or constructively received. See Rev. Proc. 2002–28, page 815.

Section 6081.—Extension of Time for Filing Returns

Section 7502.—Timely Mailing Treated as Timely Filing and Paying

26 CFR § 1.6081–1(a): Extension of time for filing returns. 26 CFR 301.7502–1: Timely mailing treated as timely filing.

This ruling sets forth the position that the Internal Revenue Service will accept, as timely filed, a federal tax return, claim for refund, statement, or other document required or permitted to be filed with the Service that is mailed from and officially postmarked in a foreign country on or before the last date prescribed for filing,

2002–18 I.R.B. 811 May 6, 2002

Service will be deemed timely filed on the date the document was given to the delivery service, as recorded electronically on its data base or marked on the cover in which the item is to be delivered, as described in section 7502(f)(2)(C). If the last date for filing falls on a Saturday, Sunday, or a legal holiday within the meaning of section 7503, returns, claims, statements and other documents will be considered timely if given to a designated international delivery service before midnight on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. Timely filing treatment will also apply to documents filed with the United States Tax Court, such as petitions or notices of appeal, pursuant to section 7502(d)(1).

HOLDINGS:

The Internal Revenue Service will accept, as timely filed, a federal tax return, claim for refund, statement, or other document required or permitted to be filed with the Service that is mailed from and officially postmarked in a foreign country on or before the last date prescribed for filing, including any extension of time for filing. If the last date for filing falls on a Saturday, Sunday, or a legal holiday within the meaning of section 7503, returns, claims, statements, and other documents will be considered timely if postmarked on or before the next succeeding day which is not a Saturday, Sunday, or a legal holiday.
A federal tax return, claim for refund, statement, or other document required or permitted to be filed with the Service or with the United States Tax Court that is given to a designated international delivery service before midnight on the last date prescribed for filing shall be deemed timely filed pursuant to section 7502(a), (d)(1), and (f)(1). If the last date for filing falls on a Saturday, Sunday, or a legal holiday within the meaning of section 7503, returns, claims, statements, and other documents will be considered timely if given to a designated international delivery service before midnight on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. Such returns, claims for refund, statements, or other documents will be deemed filed on the date the document was given to the designated delivery service, as recorded electronically on its data base or marked on the cover in which the item is to be delivered pursuant to section 7502(f)(2)(C).

including any extension of time for filing. The ruling also sets forth the position that a federal tax return, claim for refund, statement, or other document required or permitted to be filed with the Service or with the United States Tax Court given to a designated private delivery service before midnight on the last date prescribed for filing shall be deemed timely filed pursuant to sections 7502(a), (d)(1), and (f)(1) of the Code.

Rev. Rul. 2002–23

ISSUES:

Whether the Internal Revenue Service (“Service”) will accept as timely filed a federal tax return, claim for refund, statement, or other document required or permitted to be filed with the Service when it is mailed from and officially postmarked in a foreign country on or before the last date prescribed for filing?
Whether a federal tax return, claim for refund, statement, or other document required or permitted to be filed with the Service or with the United States Tax Court is timely filed when it is given to a designated delivery service in a foreign country and recorded or marked as described in section 7502(f)(2)(C) before midnight on the last date prescribed for filing?

LAW AND ANALYSIS:

Pursuant to Rev. Rul. 80–218 (1980–2 C.B. 386), and Policy Statement P–2–9 (July 27, 1969), the Service has accepted federal tax returns mailed by taxpayers from foreign countries as timely filed if they bear an official postmark dated on or before the last date prescribed for filing, including any extension of time for such filing. If the last date for filing falls on a Saturday, Sunday, or a legal holiday within the meaning of section 7503, returns have been considered timely if postmarked on or before the next succeeding day which is not a Saturday, Sunday, or a legal holiday. This revenue ruling reaffirms the position previously announced in Rev. Rul. 80–218 and Policy Statement P–2–9. For purposes of this revenue ruling, the term legal holiday means a legal holiday in the District of

Columbia in the United States, or a Statewide legal holiday in the State where the federal tax return, claim for refund or other document is required to be filed or sent. The term does not include legal holidays in foreign countries unless such holidays are also legal holidays in the District of Columbia or applicable State, as described above.

In addition, pursuant to the authority granted by section 6081(a) of the Code, which permits the Commissioner to grant a reasonable extension of time for filing any return, declaration, statement or other document, this revenue ruling expands the application of the timely mailing is timely filing rules set forth in Rev. Rul. 80–218 to claims for refund, statements or other documents required or permitted to be filed with the Service. Accordingly, claims for refund, statements and other documents will be treated as timely filed if the conditions described above are satisfied. If, however, the envelope that contains a claim, statement or other document has a timely postmark, but it is received after the time when an envelope postmarked and mailed at that time and location would ordinarily be received, the sender may be required to prove that it was timely mailed.

Timely filing treatment, however, will not apply to foreign postmarked documents filed with the United States Tax Court, such as petitions and notices of appeal, unless given to a designated international delivery service as discussed below. See, e.g., Sarrell v. Commissioner, 117 T.C. 122 (2001). Section 7502(f) authorizes the Secretary to designate delivery services satisfying the requirements of section 7502(f)(2) to deliver items qualifying for timely mailing as timely filing treatment in the same manner as items postmarked and deposited in the United States mail. Returns, claims for refund, statements and other documents sent via an international delivery service qualify for timely mailing as timely filing treatment if the international delivery service meets the requirements of section 7502(f)(2) and is designated under Rev. Proc. 97–19 (1997–1 C.B. 644). Accordingly, returns, claims for refund, statements and other documents given to a designated international delivery service before midnight on the last date prescribed for filing with the

May 6, 2002 812 2002–18 I.R.B.

EFFECT ON OTHER REVENUE RULINGS:

Rev. Rul. 80–218 (1980–2 C.B. 386) is superseded.

DRAFTING INFORMATION

The principal author of this revenue ruling is David A. Abernathy of the Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact Mr. Abernathy at (202) 622–7860 (not a toll-free call).

2002–18 I.R.B. 813 May 6, 2002