SECTION 22. LAST-IN — Internal Revenue Bulletin 2008-36

(LIFO) INVENTORIES (§ 472)

.01 Change from the LIFO inventory method .

(1) Description of change .

(a) In general . This change applies to a taxpayer that wants to:

(i) change from the LIFO inventory method for all its LIFO inventory or for one or more dollar-value pools; and

(ii) change to a permitted method or methods as determined in section 22.01(1)(b) of this APPENDIX.

(b) Method to be used .

(i) Determining the permitted method to be used . A taxpayer may change to one or more non-LIFO inventory methods for the LIFO inventories that are the subject of this accounting method change, but only if the selected non-LIFO method is a permitted method for the inventory goods to which it will be applied. For example, a heavy equipment dealer may change to the specific identification method for new heavy equipment inventories and the replacement cost method, as described in Rev. Proc. 2006–14, 2006–1 C.B. 350, for heavy equipment parts inventories.

(ii) Permitted method defined . For purposes of section 22.01 of this APPENDIX, an inventory method (identification or valuation, or both) is a permitted method if it is specifically permitted by the Code, the regulations, a decision by the United States Supreme Court, a revenue ruling, a revenue procedure, or other guidance published in the IRB for the inventory goods and if the taxpayer is neither prohibited from using that method nor required to use a different inventory method for those inventory goods.

(iii) Determining permitted method . Whether an inventory method is a permitted method is determined without regard

to the types and amounts of costs capitalized under the taxpayer’s method of computing inventory cost. See § 263A and the regulations thereunder, which govern the types and amounts of costs required to be included in inventory cost for taxpayers subject to those provisions.

(2) Certain scope limitation inapplica- ble . The scope limitation in section 4.02(7) of this revenue procedure does not apply in the first taxable year that the taxpayer does not or will not comply with the requirements of § 472(e)(2) because the taxpayer has applied or will apply International Financial Reporting Standards in its financial statements or because the taxpayer has been acquired by an entity that has not or will not use the LIFO method in its financial statements.

(3) Limitation on LIFO election . The taxpayer may not re-elect the LIFO inventory method for a period of at least five taxable years beginning with the year of change unless, based on a showing of unusual and compelling circumstances, consent is specifically granted by the Commissioner to change the method of accounting at an earlier time. A taxpayer that wants to re-elect the LIFO inventory method within a period of five taxable years (beginning with the year of change) must file a Form 3115 in accordance with Rev. Proc. 97–27 (or any successor). A taxpayer that wants to re-elect the LIFO inventory method after a period of five taxable years (beginning with the year of change) is not required to file a Form 3115 in accordance with Rev. Proc. 97–27, but must file a Form 970, Application To Use LIFO Inventory Method, in accordance with § 1.472–3.

(4) Effect of subchapter S election by corporation .

(a) S election effective for year of LIFO discontinuance . If a C corporation elects to be treated as an S corporation for the taxable year in which it discontinues use of the LIFO inventory method, § 1363(d) requires an increase in the taxpayer’s gross income for the LIFO recapture amount (as defined in § 1363(d)(3)) for the taxable year preceding the year of change (the taxpayer’s last taxable year as a C corporation) and a corresponding adjustment to the basis of the taxpayer’s inventory as of the end of the taxable year preceding the year of change. Any increase in in

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light-duty trucks (other goods) inventory may incorporate a change, using a cut-off basis, from IPIC to another acceptable LIFO method for those other goods into this change. When changing from IPIC to a dollar-value LIFO method for its other goods, the automobile dealer must establish separate inventory pools for new automobiles and new light-duty trucks, unless the automobile dealer also concurrently changes to the Vehicle-Pool Method ( see section 22.08 of this APPENDIX). Further, the automobile dealer must establish a separate inventory pool for the parts and accessories.

(i) the conditions in section 5.03 of Rev. Proc. 97–36; and

(ii) for an automobile dealer changing from the IPIC method, the automobile dealer also must attach to the application a schedule setting forth the classes of goods for which the automobile dealer has elected to use the LIFO method and the accounting method changes being made under section 22.03 of this APPENDIX for each class of goods.

(3) Concurrent change to the Vehi- cle-Pool Method . A taxpayer that wants to make both a change to the Alternative LIFO Method under this section 22.03 of the APPENDIX and a change to the Vehicle-Pool Method under Rev. Proc. 2008–23, 2008–12 I.R.B. 664, ( see section 22.08 of this APPENDIX) should file a single Form 3115 for both changes and enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.03 of this APPENDIX is “58.” See section 6.02(4) of this revenue procedure.

(5) Contact information . For further information regarding a change under this section, contact Leo Nolan at 202–622–4970 (not a toll-free call).

.04 Used vehicle alternative LIFO method .

(1) Description of change . This change applies to a taxpayer that sells used automobiles and used light-duty trucks (“used

.02 Determining current-year cost un- der the LIFO inventory method .

(1) Description of change .

(a) Applicability . This change applies to a taxpayer using the LIFO inventory method that wants to change its method of determining current-year cost to:

(i) the actual cost of the goods most recently purchased or produced (most-recent-acquisitions method);

(ii) the actual cost of the goods purchased or produced during the taxable year in the order of acquisition (earliest-acquisitions method);

(iii) the average unit cost equal to the aggregate actual cost of all the goods purchased or produced throughout the taxable year divided by the total number of units so purchased or produced. See § 1.472–8(e)(2)(ii);

(iv) the specific identification method; or

(v) a rolling-average method if the taxpayer uses that rolling-average method in accordance with Rev. Proc. 2008–43, 2008–30 I.R.B. 186.

(b) Inapplicability . This change does not apply to a taxpayer using the lower of cost or market method to determine current-year cost. A taxpayer using the lower of cost or market method that valued inventory below cost may not change to a proper cost valuation under this section 22.02 of the APPENDIX.

(2) Certain scope limitation inapplica- ble . The scope limitation in section 4.02(7) of this revenue procedure does not apply to the change to a rolling-average method in the taxpayer’s first or second taxable year ending on or after December 31, 2007.

(3) Manner of making change . This change is made using a cut-off basis and applies only to the computations of current-year cost after the beginning of the year of change. See section 2.06 of this revenue procedure for more information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor required.

(4) Concurrent change to a rolling-av- erage method . A taxpayer that wants to make both a change to a rolling-average method of determining current-year cost for its LIFO inventory under this section 22.02 of the APPENDIX and a change to a rolling-average method of ac

counting for non-LIFO inventories under Rev. Proc. 2008–43 ( see section 21.14 of this APPENDIX) should file a single Form 3115 for both changes and enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.02 of this APPENDIX is “57.” See section 6.02(4) of this revenue procedure.

(6) Contact information . For further information regarding a change under this section, contact Leo Nolan at 202–622–4970 (not a toll-free call).

.03 Alternative LIFO inventory method for retail automobile dealers .

(1) Description of change .

(a) Applicability . This change applies to a taxpayer engaged in the trade or business of retail sales of new automobiles or new light-duty trucks (“automobile dealer”) that wants to change to the “Alternative LIFO method” described in section 4 of Rev. Proc. 97–36, 1997–2 C.B. 450, as modified by Rev. Proc. 2008–23, 2008–12 I.R.B. 664, for its LIFO inventories of new automobiles and new light-duty trucks. Light-duty trucks are trucks with a gross vehicle weight of 14,000 pounds or less, which also are referred to as class 1, 2, or 3 trucks.

(b) Inapplicability . This change does not apply to an automobile dealer that uses the inventory price index computation (IPIC) method for goods other than new automobiles, new light-duty trucks, parts and accessories, used automobiles, and used trucks.

(2) Manner of making change .

(a) Cut-off basis . This change is made using a cut-off basis and applies only to the computation of ending inventories after the beginning of the year of change. See section 2.06 of this revenue procedure and section 5.03(6) of Rev. Proc. 97–36 for more information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor required.

(b) Concurrent change from IPIC method . An automobile dealer using the IPIC method that also has parts and accessories, used automobiles, or used

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vehicle dealers”) that wants to change to the “Used Vehicle Alternative LIFO Method” as described in Rev. Proc. 2001–23, 2001–1 C.B. 784, as modified by Announcement 2004–16, 2004–1 C.B. 668, and Rev. Proc. 2008–23, 2008–12 I.R.B. 664.

(2) Additional requirements . A taxpayer making this change must comply with the additional conditions set forth in section 5.04 of Rev. Proc. 2001–23.

(3) Manner of making change .

(a) Cut-off basis . This change is made on a cut-off basis, which requires that the value of the taxpayer’s used automobile and used light-duty truck inventory at the beginning of the year of change must be the same as the value of that inventory at the end of the preceding taxable year, plus cost restorations, if any, required by section 5.04(5) of Rev. Proc. 2001–23. See section 2.06 of this revenue procedure for more information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor required.

(b) Bargain purchase . If the taxpayer has previously improperly accounted for a bulk bargain purchase, the taxpayer must, as part of this change, first change its method of accounting to comply with Hamilton Industries, Inc. v. Commis- sioner, 97 T.C. 120 (1991), and compute a § 481(a) adjustment for that part of the change. See Announcement 91–173, 1997–47 I.R.B. 29. Upon examination, if a taxpayer has properly changed under section 22.04 of this APPENDIX except for complying with section 22.04(3)(b) of this APPENDIX, an examining agent may not deny the taxpayer the change. However, the taxpayer does not receive audit protection under section 7 of this revenue procedure with respect to the improper method of accounting for the bargain purchase. Accordingly, the examining agent may make any necessary adjustments in any open year to effect compliance with Hamilton Industries, Inc .

(c) New base year . In effecting a change to the Used Vehicle Alternative LIFO Method under this revenue procedure, any LIFO inventory cost increments previously determined and the value of those increments must be retained. Instead of using the earliest taxable year for which the taxpayer adopted LIFO as the base

year, the year of change must be used as the new base year in determining the value of all existing LIFO cost increments for the year of change and later taxable years. (The cumulative index at the beginning of the year of change will be 1.00). The base-year cost of all LIFO cost increments at the beginning of the year of change must be restated in terms of new base-year costs, using the year of change as the new base year, and the indexes for previously determined inventory increments must be recomputed accordingly. The new base-year cost of a pool is equal to the total current-year cost of all the vehicles in the pool.

(d) Application . Taxpayers are reminded to complete all applicable parts of the Form 3115, including Part I of Schedule C.

(4) Concurrent change from IPIC method . A used vehicle dealer using the IPIC method that also has parts and accessories, new automobiles, or new light-duty trucks (other goods) inventory may incorporate a change, using a cut-off basis, from IPIC to another acceptable LIFO method for those other goods into this change. When changing from IPIC to a dollar-value LIFO method for its other goods, the used vehicle dealer must establish separate inventory pools for new automobiles and new light-duty trucks, unless the used vehicle dealer also concurrently changes to the Vehicle-Pool Method ( see section 22.08 of this APPENDIX). Further, the used vehicle dealer must establish a separate inventory pool for the parts and accessories.

(5) Concurrent change to the Vehicle- Pool Method . A taxpayer that wants to make both a change to the Used Vehicle Alternative LIFO Method under this section 22.04 of the APPENDIX and a change to the Vehicle-Pool Method under Rev. Proc. 2008–23 ( see section 22.08 of this APPENDIX) should file a single Form 3115 for both changes and enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(6) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.04 of this APPENDIX is “59.” See section 6.02(4) of this revenue procedure.

(7) Contact information . For further information regarding a change under this section, contact Leo Nolan at 202–622–4970 (not a toll-free call).

.05 Determining the cost of used vehi- cles purchased or taken as a trade-in .

(1) Description of change and scope .

(a) Applicability . This change applies to a taxpayer using the LIFO inventory method that wants to:

(i) determine the cost of used vehicles acquired by trade-in using the average wholesale price listed by an official used vehicle guide on the date of the trade-in. See Rev. Rul. 67–107, 1967–1 C.B. 115. The official used vehicle guide selected must be consistently used unless the taxpayer receives permission to use a different guide;

(ii) use a different official used vehicle guide for determining the cost of used vehicles acquired by trade-in;

(iii) determine the cost of used vehicles purchased for cash using the actual purchase price of the vehicle; or

(iv) reconstruct the beginning-of-theyear cost of used vehicles purchased for cash using values computed by national auto auction companies based on vehicles purchased for cash. The national auto auction company selected must be consistently used.

(b) Inapplicability . This change does not apply to a taxpayer that adopted or changed to the Used Vehicle Alternative LIFO Method ( see section 22.04 of the APPENDIX of this revenue procedure).

(2) Manner of making change . This change is made on a cut-off basis and applies only to used vehicles acquired on or after the beginning of the year of change. See section 2.06 of this revenue procedure for more information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor required.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.05 of this APPENDIX is “60.” See section 6.02(4) of this revenue procedure.

(4) Contact information . For further information regarding a change under this section, contact Patty Ward at 202–622–4970 (not a toll-free call).

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(b) change to or from the 10 percent method. See § 1.472–8(e)(3)(iii)(C) for principles concerning the assignment of inventory items to BLS categories under the IPIC method;

(c) change to IPIC-method pools described in § 1.472–8(b)(4) or § 1.472–8(c)(2), including a change to begin or discontinue applying one or both of the 5 percent pooling rules;

(d) change to combine or separate pools as a result of the application of a 5 percent pooling rule described in § 1.472–8(b)(4) or § 1.472–8(c)(2);

(e) change its selection of BLS table from Table 3 (Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average, detailed expenditure categories) of the monthly CPI Detailed Report to Table 6 (Producer price indexes percent changes for commodity groupings and individual items, not seasonally adjusted) of the monthly PPI Detailed Report, or vice versa . See § 1.472–8(e)(3)(iii)(B)(2) for principles concerning the selection of a BLS table under the IPIC method;

(f) change the assignment of one or more inventory items to BLS categories under either Table 3 (Consumer Price Index for All Urban Consumers (CPI-U): U.S. City average, detailed expenditure categories) of the monthly CPI Detailed Report or Table 6 (Producer price indexes and percent changes for commodity groupings and individual items, not seasonally adjusted) of the monthly PPI Detailed Report. See § 1.472–8(e)(3)(iii)(C) for principles concerning the assignment of inventory items to BLS categories under the IPIC method; and

(g) change the representative month when necessitated because of a change in taxable year or a change in method of determining current-year cost made pursuant to section 22.02 of this APPENDIX. See § 1.472–8(e)(3)(iii)(B) for principles concerning the determination of a representative month under the IPIC method. A change in method of determining current-year cost and a change of the representative month may be made using a single Form 3115, provided the taxpayer enters the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115. See section 6.02(4) of this revenue procedure.

.06 Change to the inventory price index computation (IPIC) method .

(1) Description of change . This change applies to a taxpayer that wants to change:

(a) from a non-IPIC LIFO inventory method to the IPIC method in accordance with all relevant provisions of § 1.472–8(e)(3); or

(b) from the IPIC method as described in T.D. 7814, 1982–1 C.B. 84, (March 15, 1982) (the old IPIC method) to the IPIC method as described in T.D. 8976, 2002–1 C.B. 421, (January 8, 2002) (the new IPIC method), which includes the following required changes (if applicable):

(i) from using 80% of the inventory price index (IPI) to using 100% of the IPI to determine the base-year cost and dollar-value of a LIFO pool(s);

(ii) from using a weighted arithmetic mean to using a weighted harmonic mean to compute an IPI for a dollar-value pool(s); and

(iii) from using a components-of-cost method to define inventory items to using a total-product-cost method to define inventory items.

(3) Bargain purchase . If the taxpayer has previously improperly accounted for a bulk bargain purchase, the taxpayer must, as part of this change, first change its method of accounting to comply with Hamilton Industries, Inc. v. Commis- sioner, 97 T.C. 120 (1991), and compute a § 481(a) adjustment for that part of the change. See Announcement 91–173, 1997–47 I.R.B. 29. Upon examination, if a taxpayer has properly changed under section 22.06 of this APPENDIX except for complying with section 22.06(3) of this APPENDIX, an examining agent may not deny the taxpayer the change. However, the taxpayer does not receive audit protection under section 7 of this revenue procedure with respect to the improper method of accounting for the bargain purchase. Accordingly, the examining agent may make any necessary adjustments in

any open year to effect compliance with Hamilton Industries, Inc.

(4) Concurrent automatic changes . (a) A taxpayer that wants to make this change and to change its method of determining current-year cost under section 22.02 of this APPENDIX for the same year of change may file a single Form 3115 for both changes, provided the taxpayer enters the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(b) A taxpayer that wants to make this change and to change its method of pooling to IPIC-method pools described in § 1.472–8(b)(4) or § 1.472–8(c)(2) under section 22.07 of this APPENDIX for the same year of change may file a single Form 3115, provided the taxpayer enters the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(c) A taxpayer that wants to make this change and to change its method of pooling under section 22.10 of this APPENDIX for the same year of change may file a single Form 3115, provided the taxpayer enters the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.06 of this APPENDIX is “61.” See section 6.02(4) of this revenue procedure.

(6) Contact information . For further information regarding a change under this section, contact Leo Nolan at 202–622–4970 (not a toll-free call).

.07 Changes within the inventory price index computation (IPIC) method .

(1) Description of change . This change applies to a taxpayer using the IPIC method described in § 1.472–8(e)(3) as revised by T.D. 8976, 2002–1 C.B. 421, (new IPIC method) that wants to make one or more of the following changes:

(a) change from the double-extension IPIC method to the link-chain IPIC method, or vice versa . See § 1.472–8(e)(3)(iii)(E) for principles concerning the computation of the inventory price index under the double-extension IPIC method and the link-chain IPIC method;

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justment is neither permitted nor required. A taxpayer that changes its method pursuant to section 22.09 of this APPENDIX must establish a new base year in the year of change.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.09 of this APPENDIX is “140.” See section 6.02(4) of this revenue procedure.

(4) Contact information . For further information regarding a change under this section, contact Leo Nolan at 202–622–4970 (not a toll-free call).

.10 Changes to dollar-value pools of manufacturers .

(1) Description of change . This change applies to a manufacturer that:

(a) purchases goods for resale (resale goods) and, thus, must reassign resale goods from the pool(s) it maintains for the goods it manufactures to one or more resale pools;

(b) wants to change from using multiple pools described in § 1.472–8(b)(3) to using natural business unit (NBU) pools described in § 1.472–8(b)(1), or vice versa ; and

(c) wants to reassign items in NBU pools described in § 1.472–8(b)(1) into the same number or a greater number of NBU pools.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.10 of this APPENDIX is “141.” See section 6.02(4) of this revenue procedure.

(2) Manner of making change . These changes are made on a cut-off basis and apply only to the computation of ending inventories after the beginning of the year of change. See section 2.06 of this revenue procedure for more information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor required. A taxpayer that changes pursuant to sections 22.07(1)(a), (b) and (e) of this APPENDIX must establish a new base year in the year of change.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.07 of this APPENDIX is “62.” See section 6.02(4) of this revenue procedure.

(4) Contact information . For further information regarding a change under this section, contact Leo Nolan at 202–622–4970 (not a toll-free call).

.08 Changes to the Vehicle-Pool Method .

(1) Description of change . This change applies to a retail dealer or wholesale distributor (“reseller”) of cars and light-duty trucks that wants to change to the “Vehicle-Pool Method” as described in Rev. Proc. 2008–23, 2008–12 I.R.B. 664.

(2) Manner of making change . This change is made on a cut-off basis and applies only to the computation of ending inventories after the beginning of the year of change. See section 2.06 of this revenue procedure for more information regarding a cut-off basis. Accordingly, a § 481(a) adjustment is neither permitted nor required. A reseller that changes its method of pooling under Rev. Proc. 2008–23 and this section 22.08 of the APPENDIX must comply with § 1.472–8(g). Instead of using the earliest taxable year for which the reseller adopted the LIFO method for any items in a pool, the reseller must use the year of change as the base year when determining the LIFO value of that pool for the year of change and subsequent taxable years ( i.e., the cumulative index at the beginning of the year of change will be 1.00). The reseller must restate the base-year cost of all layers of increment in a pool at the beginning of the year of change in terms of new base-year cost. For an example of establishing a new base year, see § 1.472–8(e)(3)(iv)(B)( 1 )( ii ).

(3) Scope limitations inapplicable . The scope limitation in section 4.02(7) of this revenue procedure does not apply for the reseller’s first taxable year ending on or after December 31, 2007.

(4) Concurrent change to the Alter- native LIFO Method or the Used Vehicle Alternative LIFO Method . A reseller that wants to make both a change to the Vehicle-Pool Method under this section 22.08 of the APPENDIX and a change to the Alternative LIFO Method under Rev. Proc. 97–36 ( see section 22.03 of this APPENDIX) or the Used Vehicle Alternative LIFO Method under Rev. Proc. 2001–23 see section 22.04 of this APPENDIX) should file a single Form 3115 for both changes and enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 22.08 of this APPENDIX is “112.” See section 6.02(4) of this revenue procedure.

(6) Contact information . For further information regarding a change under this section, contact Leo Nolan at 202–622–4970 (not a toll-free call).

.09 Changes within the used vehicle al- ternative LIFO method .

(1) Description of change . This change applies to a taxpayer using the “Used Vehicle Alternative LIFO Method” as described in Rev. Proc. 2001–23, 2001–1 C.B. 784, as modified by Announcement 2004–16, 2004–1 C.B. 668, and Rev. Proc. 2008–23, 2008–12 I.R.B. 664, that wants to change the particular “official used vehicle guide” utilized by the taxpayer in connection with the Used Vehicle Alternative LIFO Method or any change in the precise manner of its utilization ( e.g., a change in the specific guide category that a taxpayer uses to represent vehicles of average condition for purposes of section 4.02(5)(a) of Rev. Proc. 2001–23).

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(2) Certain scope limitations inapplica- ble . A bank that changed from the § 593 reserve method under § 593(g) to the § 585 reserve method will not be prohibited under section 4.02(7) of this revenue procedure from changing its method of accounting for bad debts under this section 24.01 of the APPENDIX solely because of the § 593(g) change. A bank for which a QSub election is filed will not be prohibited under section 4.02(7) of this revenue procedure from changing its method of accounting for bad debts under this section 24.01 of the APPENDIX solely because of the deemed liquidation of the bank arising from a QSub election.

(3) Section 481(a) adjustment . Generally, the amount of the § 481(a) adjustment for a change in method of accounting under this section 24.01 of the APPENDIX is the amount of the bank’s reserve for bad debts as of the close of the taxable year immediately before the year of change. However, the amount of the § 481(a) adjustment does not include the amount of a bank’s pre–1988 reserves (as described in § 593(g)(2)(A)(ii), without taking into account § 593(g)(2)(B)) if the bank changed in a prior year from the § 593 reserve method to the § 585 reserve method and § 593(g) applied to that change. The deemed liquidation of a bank occurring solely because its parent makes a QSub election does not accelerate the § 481(a) adjustment. In accordance with section 5.04(3)(c) of this revenue procedure, a bank that ceases to be a bank under § 581 must accelerate its § 481(a) adjustment.

(4) Change from § 585 required when electing S corporation status .

(a) General rule . A bank electing S corporation status (or a bank for which a QSub election is filed) cannot use the § 585 reserve method. The filing by a bank of a Form 2553, Election by a Small Business Corporation, or the filing by a bank’s parent of Form 8869, Qualified Subchapter S Subsidiary Election, with respect to the bank will constitute an agreement by the bank to change its method of accounting for bad debts from the § 585 reserve method to the § 166 specific charge-off method effective as of the taxable year for which the S corporation election or QSub election is effective (year of change) in accordance

(4) Contact information . For further information regarding a change under this section, contact Leo Nolan at 202–622–4970 (not a toll-free call).