SECTION 1. PURPOSE

This revenue procedure modifies and supersedes Rev. Proc. 71–21, 1971–2 C.B. 549, under which the Commissioner exercised his discretion under § 446 of the Internal Revenue Code to allow taxpayers using an accrual method of accounting to defer the inclusion in gross income for federal income tax purposes of certain advance payments for services in limited situations. This revenue procedure expands Rev. Proc. 71–21 to allow qualifying taxpayers to defer to the next succeeding taxable year the inclusion in gross income for federal income tax purposes of certain advance payments (as specified in section 4 of this revenue procedure) to the extent the advance payments are deferred for financial reporting purposes. This revenue procedure allows this deferral even if the advance payments are not included in gross receipts for financial reporting purposes by, or the income is not earned through performance by, the end of the next succeeding taxable year. However, in no event will this revenue procedure allow deferral to a taxable year later than the next succeeding taxable year. This revenue procedure neither restricts a taxpayer’s ability to use the methods provided in § 1.451–5 of the Income Tax Regulations regarding advance

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agreements, financial derivatives, etc.), including purported prepayments of interest.

.03 Intellectual Property. The term “intellectual property” includes copyrights, patents, trademarks, service marks, trade names, and similar intangible property rights (such as franchise rights and arena naming rights).

.04 Received. Income is “received” by the taxpayer if it is actually or constructively received, or if it is due and payable to the taxpayer.

.05 Next Succeeding Taxable Year. The term “next succeeding taxable year” means the taxable year immediately following the taxable year in which the advance payment is received by the taxpayer.