SECTION 3. TRADE OR BUSINESS

EXPENSES (§ 162)

.01 Advances made by a lawyer on be- half of clients .

(1) Description of change . This change applies to a lawyer handling cases on a contingent fee basis that advances money to pay for costs of litigation or for other expenses on behalf of clients and that wants to change the method of accounting for such advances from treating them as deductible business expenses to treating them as loans. See Boccardo v. United States, 12 Cl. Ct. 184 (1987); Canelo v. Commissioner, 53 T.C. 217 (1969), aff’d per curiam, 447 F.2d 484 (9th Cir. 1971).

(2) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 3.01 of this APPENDIX is “2.” See section 6.02(4) of this revenue procedure.

(3) Contact information . For further information regarding a change under this section, contact Martin Osborne at 202–622–7900 (not a toll-free call).

.02 ISO 9000 costs.

(1) Description of change . This change applies to a taxpayer that wants to change its method of accounting for costs incurred to obtain, maintain and renew ISO 9000 certification to conform with Rev. Rul. 2000–4, 2000–1 C.B. 331.

(2) Scope limitations inapplicable . The scope limitations in section 4.02 of this revenue procedure do not apply to this change.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 3.02 of this APPENDIX is “3.” See section 6.02(4) of this revenue procedure.

(4) Contact information . For further information regarding a change under this section, contact Martin Osborne at 202–622–7900 (not a toll-free call).

.03 Restaurant or tavern smallwares packages .

(1) Description of change . This change applies to a taxpayer engaged in the trade or business of operating a restaurant or tavern (within the meaning of section 4.01 of Rev. Proc. 2002–12, 2002–1 C.B. 374) that wants to change its method of accounting for the costs of smallwares to the smallwares method described in Rev. Proc. 2002–12.

(2) Scope limitations inapplicable . The scope limitations in section 4.02 of this revenue procedure do not apply to this change.

(3) Section 481(a) adjustment period . A taxpayer changing its method of accounting for restaurant smallwares under this section 3.03 of the APPENDIX must take the entire § 481(a) adjustment into account in computing taxable income in the year of change.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 3.03 of this APPENDIX is “4.” See section 6.02(4) of this revenue procedure.

(5) Contact information . For further information regarding a change under this section, contact Martin Osborne at 202–622–7900 (not a toll-free call).

.04 Timber grower fertilization costs .

(1) Description of change . This change applies to a timber grower that wants to change its method of accounting to treat post-establishment fertilization costs of an established timber stand as ordinary and necessary business expenses deductible under § 162. See Rev. Rul. 2004–62, 2004–1 C.B. 1072.

(2) Scope limitations inapplicable . The scope limitations in section 4.02 of this revenue procedure do not apply to this change.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 3.04 of this APPENDIX is “86.” See section 6.02(4) of this revenue procedure.

(4) Contact information . For further information regarding a change under this section, contact Martin Osborne at 202–622–7900 (not a toll-free call).

September 8, 2008 622 2008–36 I.R.B.

of accounting for depreciation or amortization (depreciation) for any item of depreciable or amortizable property:

(i) for which the taxpayer used the impermissible method of accounting in at least two taxable years immediately preceding the year of change (but see section 6.01(1)(b) of this APPENDIX for property placed in service in the taxable year immediately preceding the year of change);

(ii) for which the taxpayer is making a change in method of accounting under § 1.446–1(e)(2)(ii)( d );

(iii) for which depreciation is determined under § 56(a)(1), § 56(g)(4)(A), § 167, §168, §197, §1400I, or §1400L(c), under § 168 prior to its amendment in 1986 (former § 168), or under any additional first year depreciation deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)); and

(iv) that is owned by the taxpayer at the beginning of the year of change (but see section 6.17 of this APPENDIX for property disposed of before the year of change).

(b) Taxpayer has not adopted a method of accounting for the item of property . If a taxpayer does not satisfy section 6.01(1)(a)(i) of this APPENDIX for an item of depreciable or amortizable property because this item of property is placed in service by the taxpayer in the taxable year immediately preceding the year of change (“1-year depreciable property”), the taxpayer may change from the impermissible method of determining depreciation to the permissible method of determining depreciation for the 1-year depreciable property by filing a Form 3115 for this change, provided the § 481(a) adjustment reported on the Form 3115 includes the amount of any adjustment that is attributable to all property (including the 1-year depreciable property) subject to the Form 3115. Alternatively, the taxpayer may change from the impermissible method of determining depreciation to the permissible method of determining depreciation for a 1-year depreciable property by filing an amended federal tax return for the property’s placed-in-service year prior to the date the taxpayer files its federal tax return for the taxable year succeeding the placed-in-service year.

(c) Inapplicability . This change does not apply to: