SECTION 5. CHANGES IN METHOD

OF ACCOUNTING

.01 In General . Any change in a taxpayer’s treatment of rotable spare parts pursuant to this revenue procedure is a change in method of accounting to which § 446 and (except as otherwise provided in this section 5) § 481, and the regulations thereunder, apply. This section 5 applies to a taxpayer within the scope of this revenue procedure that —

(1) currently does not capitalize and depreciate the cost of its rotable spare parts and wants to change to the safe harbor method of accounting described in section 4.02 of this revenue procedure; (2) currently treats its rotable spare parts in accordance with sections 4.02(1), (3), and (4) of this revenue procedure and wants to establish rotable spare parts pools in accordance with section 4.04(1) of this revenue procedure;

(3) currently treats its rotable spare parts in accordance with sections 4.02(1), (2), and (4) of this revenue procedure and wants to change to a method of accounting described in section 4.05(2) of this revenue procedure for identifying the disposed rotable spare parts; or

(4) currently treats its rotable spare parts in accordance with sections 4.02(1) and (4) of this revenue procedure and wants to establish rotable spare parts pools

2007–29 I.R.B. 112 July 16, 2007

§ 1.446–1(e)(3)(i) and Rev. Proc. 97–27, 1997–1 C.B. 680 (as modified and amplified by Rev. Proc. 2002–19, 2002–1 C.B. 696, and amplified and clarified by Rev. Proc. 2002–54, 2002–2 C.B. 432).

.06 Requirement to Change From the Safe Harbor Method . A taxpayer that changes to the safe harbor method under this revenue procedure and subsequently fails to meet the requirements of section 4.01 of this revenue procedure must change its method of accounting for rotable spare parts to an appropriate inventory method of accounting for the first taxable year in which the taxpayer becomes ineligible to use the safe harbor method of accounting for rotable spare parts. A taxpayer that is required to change its method of accounting under this section 5.06 must file a Form 3115 in accordance with the automatic change in method of accounting provisions of Rev. Proc. 2002–9 (or any successor), with the following modifications:

(1) the scope limitations in section 4.02 of Rev. Proc. 2002–9 do not apply; and

(2) the designated automatic accounting method change number for changes in method of accounting from the safe harbor method of accounting made pursuant to this section 5.06 is No. 110.