SECTION 6. TERMS AND CONDITIONS

OF CHANGE

.01 In General .02 Short Period Tax Return .03 Record Keeping .04 Subsequent Year Tax Returns .05 Creation of Net Operating Loss .06 Creation of General Business Credits .07 Concurrent Change for Related Entities

2002–47 I.R.B. 885 November 25, 2002

pose, an interest in a pass-through entity is de minimis only if, for each of the prior three taxable years of the individual:

(i) the amount of income (including ordinary income or loss, capital gain or losses, rents, royalties, interest, dividends, and deduction equivalent of credits) from such pass-through entity is less than or equal to (A) 5 percent of the individual’s gross income (without adjustments) from all sources for those taxable years, and (B) $10,000; and

(ii) the amount of the individual’s gross income (without adjustments) from all such pass-through entities is, in the aggregate, less than or equal to the amounts described in (A) and (B) above. See section 4.04 of this revenue procedure for an example of this rule.

.03 Nonautomatic Changes. Individuals that are not eligible to obtain automatic approval for a change in accounting period under this revenue procedure, applicable regulations, or any other published administrative procedures, must secure prior approval from the Commissioner for a change in annual accounting period pursuant to § 442 and the regulations thereunder. See Rev. Proc. 2002–39, 2002–22 I.R.B. 1046.

.04 Example. (i) F, an individual having a taxable year ending June 30, wants to change F’s taxable year to the calendar year. F has interests in the capital and profits of five partnerships, IJK, LMN, OPQ, RST, and UVW. All of the partnerships have been in existence for at least three taxable years. F’s interest in IJK is greater than 50 percent. IJK uses a majority interest taxable year of June 30. F’s interest in LMN is 50 percent; the other 50 percent interest is owned by G, an individual filing federal income tax returns on a calendar year basis. LMN also wants to change its taxable year to a calendar year. LMN uses a June 30 taxable year under the least aggregate deferral rules of § 1.706–1(b)(3). F’s interests in OPQ, RST, and UVW are 15 percent, 10 percent, and 5 percent, respectively. OPQ uses its majority interest taxable year under § 706(b)(4), which ends May 31; RST and UVW each use their respective majority interest taxable years under § 706(b)(4), which end December 31. F’s distributive share of income/(loss) from OPQ for each of the prior three taxable years is $5,000, $(1,000), and $2,000, re

date of the marriage. Generally, this change is made by filing a federal income tax return for the short period, and not by filing a Form 1128.