SECTION 20. RENT (§ 467)

.01 Change from a ratable inclusion of rental income or expense to inclusion in accordance with the rent allocation .

(1) Description of change .

(a) Applicability . This change applies to a taxpayer that:

(i) is a party to § 467 rental agreements (within the meaning of § 1.467–1(c)(1) for rental agreements entered into after May 18, 1999, and § 467(d) for all other agreements);

(ii) includes in taxable income a ratable or straight-line amount of rental income or expense for its § 467 rental agreements; and

(iii) wants to change its method of accounting for its fixed rent (as defined in § 1.467–1(d)(2)) to the rent allocation method provided in § 1.467–1(d)(2)(iii).

(b) Inapplicability . This change does not apply to taxpayers required to use the constant rental accrual method described in § 1.467–(3)(a) or the proportional rental accrual method described in § 1.467–(2)(a) for their fixed rent.

(2) Additional requirements . The taxpayer must attach to its Form 3115 a copy

2008–36 I.R.B. 661 September 8, 2008

of one of its § 467 rental agreements to be covered by this automatic change (or at least the pages of the agreement relating to the manner in which rent is allocated).

(3) Audit protection . A taxpayer receives audit protection under section 7 of this revenue procedure in connection with this change for all of its § 467 rental agreements except those determined by the Commissioner to be disqualified leasebacks or long-term agreements described in § 1.467–(3)(b).

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 20.01 of this APPENDIX is “136.” See section 6.02(4) of this revenue procedure.

(5) Contact information . For further information regarding a change under this section, contact William Ruane at 202–622–4920 (not a toll-free call).

.02 Reserved .