SECTION 5. DEFINITIONS

.01 Taxpayer .02 Electing S Corporations .03 Required Taxable Year .04 Permitted Taxable Year .05 Natural Business Year

.01 Audit Protection

(1) In general (2) Exceptions .02 Subsequently Required Changes

(1) Prior three years gross receipts (2) Natural business year (3) Special rules .06 Ownership Taxable Year .07 Grandfathered Fiscal Year .08 First Effective Year .09 Short Period .10 Field Office, Area Office, Director .11 Under Examination

(1) In general (2) Retroactive change

(1) In general . Section 441(b) and § 1.441–1(b)(1) provide that the term “taxable year” generally means the taxpayer’s annual accounting period, if it is a calendar year or fiscal year, or, if applicable, the taxpayer’s required taxable year.

(2) Annual accounting period . Section 441(c) and § 1.441–1(b)(3) provide that the term “annual accounting period” means the annual period (calendar year or fiscal year) on the basis of which the taxpayer regularly computes its income in keeping its books.

(a) In general . Section 1.441– 1(b)(2) provides that certain taxpayers must use the particular taxable year that is required under the Code and the regulations thereunder. For example, as described below, a partnership, S corporation, or PSC has a required taxable year that generally conforms to the taxable year of its owners. H.R. Rep. No. 99–841 (Conf. Rep.), 99th Cong., 2d Sess., II–318 (1986), 1986–3 (Vol. 4) C.B. 319. Exceptions are provided for certain taxpayers, including a partnership, S corporation, or PSC, that make an election under § 444, elect to use a 52–53-week taxable year that ends with reference to its required taxable year or a taxable year elected under § 444, or establish a business purpose for having a different taxable year and obtain approval under § 442.

(b) Partnerships . Section 706(b) and § 1.706–1(b)(2) generally provide that a partnership’s taxable year must be its required taxable year. However, a partnership may have a taxable year other than its required taxable year if it makes an election under § 444, elects to use a 52–53-week taxable year that ends with reference to its required taxable year or a taxable year elected under § 444, or establishes a business purpose for having a different taxable year and obtains the approval of the Commissioner under § 442. The required taxable year for a partnership is:

(3) Required taxable year .

(1) In general (2) Partnerships and S corporations