SECTION 4. APPLICATION

.01 Change in method of account- ing for transactions described in Notice 2003–77 that are required to be disclosed as listed transactions under § 1.6011–4 . The Service will not process applications for changes in method of accounting filed for transactions within the scope of this revenue procedure that are required to be disclosed under § 1.6011–4. Taxpayers may change their method of accounting for these transactions by filing an amended return in accordance with section 4.04 of this revenue procedure.

.02 Change in method of accounting for transactions described in Notice 2003–77 that are not required to be disclosed as listed transactions under § 1.6011–4 .

Taxpayers that desire to change a method of accounting for transactions within the scope of this revenue procedure that are not required to be disclosed under § 1.6011–4 may change their method of accounting for these transactions by filing an amended return in accordance with section 4.04 of this revenue procedure or may request a change in method of accounting in accordance with the advance consent procedures of Rev. Proc. 97–27 with the following modifications:

(1) In lieu of the four year spread period for positive § 481(a) adjustments provided in section 5.02(3)(a) of Rev. Proc. 97–27, the taxpayer must take into account the entire amount of a positive § 481(a) adjustment in the taxable year of change; and

(2) The taxpayer must describe each transaction, explain in the Form 3115 why the transaction is not required to be disclosed under § 1.6011–4, and state the amount of § 481(a) adjustment for that transaction.

.03 Change in method of accounting by taxpayers that have engaged in multiple transactions described in Notice 2003–77, some of which are required to be disclosed as listed transactions under § 1.6011–4 . A taxpayer changing its method of accounting for multiple transactions within the scope of this revenue procedure, some of which are required to be disclosed under § 1.6011–4 and some of which are not required to be disclosed under § 1.6011–4:

(1) May change its method of accounting for transactions that are not required to be disclosed under § 1.6011–4 in accordance with section 4.02 of this revenue procedure, but must take into account in computing the § 481(a) adjustment only amounts attributable to those transactions; and

(2) Must file amended returns in accordance with sections 4.01 and 4.04 of this revenue procedure to change its method of accounting for all transactions required to be disclosed under § 1.6011–4 prior to filing the Form 3115 for transactions not required to be disclosed.

.04 Change in method of accounting by filing amended return .

(1) In accordance with § 1.446–1(e)(3)(ii) and Rev. Rul. 90–38, consent is hereby granted for any taxpayer that has engaged in a transaction within the scope of this revenue procedure to file

2004-22 I.R.B. 987 June 1, 2004

.03 Special rules . A taxpayer’s use of the Ratable Inclusion Method for Credit Card Annual Fees does not clearly reflect its credit card annual fee income (and thus the Commissioner does not permit its use) unless the taxpayer also complies with the rules in section 4.03(1) and 4.03(2) of this revenue procedure.

(1) Closed accounts . If a credit card is cancelled or if a cardholder account is otherwise closed during a taxable year, any remaining unrecognized portion of the credit card annual fee that is allocable to the account must be recognized in income in that year, unless the remaining portion is refunded.

(2) Fees billed in installments . If a credit card annual fee is due and payable in installments, each installment must be recognized ratably over the period to which the installment relates.

.04 Aggregation of fees . Taxpayers may account for income from credit card annual fees in an aggregate manner. A taxpayer that accounts for annual fees in an aggregate manner must establish that its recognition of credit card annual fee income satisfies the rules in sections 4.02 and 4.03 of this revenue procedure.