SECTION 4. REPLACEMENT COST

METHOD

.01 In General . A taxpayer that is within the scope of this revenue procedure is permitted to use the replacement cost

2006–4 I.R.B. 351 January 23, 2006

copy of the Form 3115 must be filed with the national office (see section 6.02(6) of Rev. Proc. 2002–9) no later than when the taxpayer’s amended return is filed; and

(4) For purposes of Line 1a of Form 3115, the designated number for the automatic accounting method change authorized by this revenue procedure is “96.” A taxpayer making the automatic change in method of accounting authorized by this revenue procedure and another automatic change in method of accounting under § 263A for the same taxable year may file one Form 3115 to make both changes, but must comply with the ordering rules of § 1.263A–7(b)(2), and must enter the automatic accounting method change numbers for both changes on Line 1a of Form 3115.

.03 Audit Protection . If a taxpayer complies with the requirements of this revenue procedure and changes its method of determining cost for its heavy equipment parts inventory to the replacement cost method provided in section 4 of this revenue procedure, the taxpayer will receive audit protection for any taxable year before the year of change with respect to the taxpayer’s method of determining cost for its heavy equipment parts inventory under § 471 or 472. See section 7 of Rev. Proc. 2002–9. However, if this change in method of accounting is made for the taxpayer’s first or second taxable year ending on or after April 30, 2005, and the taxpayer’s method of determining cost (other than by use of replacement cost) for its heavy equipment parts inventory under § 471 or 472 is an issue under consideration as of January 4, 2006, in a taxable year that ends before April 30, 2005, the taxpayer will not receive audit protection.