SECTION 33. SHORT-TERM

OBLIGATIONS (§ 1281)

.01 Interest income on short obliga- tions .

(1) Description of change . (a) This change applies to a taxpayer that wants to change its method of accounting to comply with § 1281 for interest income on short-term obligations.

(b) Under § 1281, a holder of certain short-term obligations, including a bank as defined in § 581, must include in gross income any accrued interest income on such obligations, regardless of the holder’s overall method of accounting. Section 1281 applies to all types of interest income, including acquisition discount, original issue discount (OID), and stated interest. See S. Rep. No. 99–313, 99 ^th Cong., 2d Sess. 903 (1986), 1986–3 (Vol. 3) C.B. 903. (c) Section 1283(a)(1) generally defines a short-term obligation as any bond, debenture, note, certificate, or other evidence of indebtedness that matures in one year or less from its issue date.

(d) Under §§ 1281(a) and 1283(c), a holder of a short-term obligation subject to § 1281 must include in gross income an amount equal to the sum of the daily portions of the acquisition discount or OID, whichever is applicable, on the obligation for each day during the taxable year that the obligation is held by the holder. See § 1283(b), as modified by § 1283(c), to determine the daily portions of acquisition discount or OID. In addition, § 1281(a) requires the holder to include in gross income any stated interest that is payable on the short-term obligation (other than stated interest taken into account to determine the amount of the acquisition discount or OID) as it accrues.

(2) Section 481(a) adjustment period . A taxpayer must take the entire § 481(a) adjustment into account in computing taxable income for the year of change.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 33.01 of this APPENDIX is “74.” See section 6.02(4) of this revenue procedure.

(4) Contact information . For further information regarding a change under this section, contact William E. Blanchard at 202–622–3950 (not a toll-free call).

.02 Stated interest on short-term loans of cash method banks .

(1) Description of change . This change applies to a bank that uses the cash receipts and disbursements (cash) method of accounting as its overall accounting method and that wants to change its method of accounting from accruing stated interest on short-term loans made in the ordinary course of business to using the cash method for that interest. For example, see Security State Bank v. Commissioner, 214 F.3d 1254 (10th Cir. 2000), aff’g 111 T.C. 210 (1998), acq ., 2001–1 C.B. xix; and Se- curity Bank Minnesota v. Commissioner, 994 F.2d 432 (8th Cir. 1993), aff’g 98 T.C. 33 (1992), in which the courts held that § 1281 does not apply to short-term loans made by a cash method bank in the ordinary course of its business.

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

(3) Section 481(a) adjustment period . A taxpayer making this change must take the entire § 481(a) adjustment into account in computing taxable income for the year of change.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 33.02 of this APPENDIX is “75.” See section 6.02(4) of this revenue procedure.

(5) Contact information . For further information regarding a change under this section, contact William E. Blanchard at 202–622–3950 (not a toll-free call).

2008–36 I.R.B. 675 September 8, 2008

APPENDIX

Section Number

APPENDIX CONTACT LIST

Designated

Automatic Accounting Change Number Contact Name Telephone Number Office

1.01 91 David Silber 202–622–3930 FI&P 2.01 1 William Ruane 202–622–4920 IT&A 3.01 2 Martin Osborne 202–622–7900 IT&A 3.02 3 Martin Osborne 202–622–7900 IT&A 3.03 4 Martin Osborne 202–622–7900 IT&A 3.04 86 Martin Osborne 202–622–7900 IT&A 4.01 5 Sean Dwyer 202–622–5020 IT&A 5.01 16 William E. Blanchard 202–622–3950 FI&P 6.01 7 Douglas Kim 202–622–4930 IT&A 6.02 8 Douglas Kim 202–622–4930 IT&A 6.03 10 Edward Schwartz 202–622–4960 IT&A 6.04 11 Douglas Kim 202–622–4930 IT&A 6.05 12 Douglas Kim 202–622–4930 IT&A 6.06 13 Douglas Kim 202–622–4930 IT&A 6.07 14 Douglas Kim 202–622–4930 IT&A 6.08 15 Douglas Kim 202–622–4930 IT&A 6.09 87 Douglas Kim 202–622–4930 IT&A 6.10 88 Douglas Kim 202–622–4930 IT&A 6.11 89 Bernard Harvey 202–622–4930 IT&A 6.12 97 Douglas Kim 202–622–4930 IT&A 6.13 98 Mark Weiss 202–622–7750 CORP 6.14 99 Bernard Harvey 202–622–4930 IT&A 6.15 104 Douglas Kim 202–622–4930 IT&A 6.16 105 Douglas Kim 202–622–4930 IT&A 6.17 107 Douglas Kim 202–622–4930 IT&A 6.18 116 Douglas Kim 202–622–4930 IT&A 6.19 117 Douglas Kim 202–622–4930 IT&A 6.20 118 Douglas Kim 202–622–4930 IT&A 6.21 119 Douglas Kim 202–622–4930 IT&A 6.22 115 Douglas Kim 202–622–4930 IT&A 7.01 17 Grant Anderson 202–622–4930 IT&A 8.01 100 Bernard Harvey 202–622–4930 IT&A 8.02 101 Jennifer Bernardini 202–622–3110 PS&I 8.03 102 Nicole Cimino 202–622–3110 PS&I 9.01 18 Douglas Kim 202–622–4930 IT&A 9.02 120 Douglas Kim 202–622–4930 IT&A 10.01 19 Gwen Turner 202–622–5020 IT&A 10.02 20 Gwen Turner 202–622–5020 IT&A 10.03 21 Gwen Turner 202–622–5020 IT&A 10.04 47 Gwen Turner 202–622–5020 IT&A 10.05 78 Gwen Turner 202–622–5020 IT&A 10.06 109 Gwen Turner 202–622–5020 IT&A 10.07 121 Gwen Turner 202–622–5020 IT&A 11.01 22 Donna Crawford 202–622–4970 IT&A Kari Fisher 202–622–4970 IT&A 11.02 23 Donna Crawford 202–622–4970 IT&A Kari Fisher 202–622–4970 IT&A 11.03 24 Donna Crawford 202–622–4970 IT&A Kari Fisher 202–622–4970 IT&A 11.04 25 Cheryl Oseekey 202–622–4970 IT&A 11.05 77 John Faron 202–622–4930 IT&A 11.06 92 John Faron 202–622–4930 IT&A 12.01 26 Steve Gee 202–622–4970 IT&A 13.01 27 Maryellen Simpson 202–622–6030 TEGE 13.02 28 Maryellen Simpson 202–622–6030 TEGE

September 8, 2008 676 2008–36 I.R.B.

APPENDIX

Section Number

Designated

Automatic Accounting Change Number Contact Name Telephone Number Office

13.03 29 James Holland 202–283–9699 EP Carlton Watkins 202–283–9625 EP 14.01 122, 123 W. Thomas McElroy, Jr. 202–622–4970 IT&A 14.02 31 Erika Reigle 202–622–4950 IT&A 14.03 32,33 Kari Fisher 202–622–4970 IT&A 14.04 34, 35 W. Thomas McElroy, Jr. 202–622–4970 IT&A 14.05 71 William E. Blanchard 202–622–3950 FI&P 14.06 85 Bernard Harvey 202–622–4930 IT&A 14.07 90 Josephine Firehock 202–622–3970 FI&P Kay Hossofsky 202–622–3970 FI&P 14.08 108 Timothy Sebastian 202–622–3920 FI&P 14.09 124 Gwen Turner 202–622–5020 IT&A 14.10 125 Erika Reigle 202–622–4950 IT&A 14.11 126 Kari Fisher 202–622–4970 IT&A 14.12 127 Sharon Galm 202–622–3930 FI&P 14.13 128 Robert Basso 202–622–4950 IT&A Renay France 202–622–5020 IT&A 14.14 129 Grant Anderson 202–622–4930 IT&A Karla Meola 202–622–4930 IT&A 15.01 36 Timothy Sebastian 202–622–3920 FI&P 15.02 37 R. Matthew Kelley 202–622–7900 IT&A 15.03 38 R. Matthew Kelley 202–622–7900 IT&A 15.04 39 R. Matthew Kelley 202–622–7900 IT&A 15.05 80, 81 Santina Jannotta 202–622–3930 FI&P 15.06 82 Santina Jannotta 202–622–3930 FI&P 15.07 83, 84 R. Matthew Kelley 202–622–7900 IT&A 15.08 94 Santina Jannotta 202–622–3930 FI&P 15.09 103 Michael Schmit 202–622–4960 IT&A 15.10 130 R. Matthew Kelley 202–622–7900 IT&A 16.01 131 William E. Blanchard 202–622–3950 FI&P 17.01 132 Willie Armstrong 202–622–4970 IT&A 18.01 41 Lore Cavanaugh 202–622–4960 IT&A 19.01 42, 133, 134 Sandra Cheston 202–622–7900 IT&A 19.02 43 Jamie Kim 202–622–4950 IT&A 19.03 44 Jamie Kim 202–622–4950 IT&A 19.04 45, 113 Jamie Kim 202–622–4950 IT&A 19.05 46 Jamie Kim 202–622–4950 IT&A 19.06 106 Leta Ayres 202–622–5020 IT&A 19.07 135 Jamie Kim 202–622–4950 IT&A 20.01 136 William Ruane 202–622–4920 IT&A 21.01 48 Patty Ward 202–622–4970 IT&A 21.02 49 Steve Gee 202–622–4970 IT&A 21.03 50, 51 W. Thomas McElroy, Jr. 202–622–4970 IT&A 21.04 53 Patty Ward 202–622–4970 IT&A 21.05 54 Patty Ward 202–622–4970 IT&A 21.06 55 Willie Armstrong 202–622–4970 IT&A 21.07 63 Willie Armstrong 202–622–4970 IT&A 21.08 96 Willie Armstrong 202–622–4970 IT&A 21.09 110 Gwen Turner 202–622–5020 IT&A 21.10 111 W. Thomas McElroy, Jr. 202–622–4970 IT&A 21.11 137 Patty Ward 202–622–4970 IT&A 21.12 138 Patty Ward 202–622–4970 IT&A 21.13 139 Patty Ward 202–622–4970 IT&A 21.14 114 Leo Nolan 202–622–4970 IT&A 22.01 56 Leo Nolan 202–622–4970 IT&A 22.02 57 Leo Nolan 202–622–4970 IT&A 22.03 58 Leo Nolan 202–622–4970 IT&A 22.04 59 Leo Nolan 202–622–4970 IT&A 22.05 60 Patty Ward 202–622–4970 IT&A

2008–36 I.R.B. 677 September 8, 2008

APPENDIX

Section Number

Designated

Automatic Accounting Change Number Contact Name Telephone Number Office

22.06 61 Leo Nolan 202–622–4970 IT&A 22.07 62 Leo Nolan 202–622–4970 IT&A 22.08 112 Leo Nolan 202–622–4970 IT&A 22.09 140 Leo Nolan 202–622–4970 IT&A 22.10 141 Leo Nolan 202–622–4970 IT&A 23.01 64 Eric E. Boody 202–622–3950 FI&P 24.01 66 Sharon Galm 202–622–3930 FI&P Laura Fields 202–622–3050 PS&I 25.01 67 Melissa Luxner 202–622–3970 FI&P Kay Hossofsky 202–622–3970 FI&P 26.01 68 Melissa Luxner 202–622–3970 FI&P Kay Hossofsky 202–622–3970 FI&P 27.01 79 Santina Jannotta 202–622–3930 FI&P 28.01 69 Anne Shelburne 202–435–5145 INTL 29.01 70 Barbara Felker 202–622–3850 INTL 30.01 142 Shareen Pflanz 202–622–4920 IT&A 31.01 72 William E. Blanchard 202–622–3950 FI&P 32.01 73 William E. Blanchard 202–622–3950 FI&P 33.01 74 William E. Blanchard 202–622–3950 FI&P 33.02 75 William E. Blanchard 202–622–3950 FI&P

turn data following the same methodology used for the 2006 year.

SECTION 3. APPLICATION-ESTIMATED TAXES

To compute estimated tax and the installment payments of estimated tax due for taxable years beginning after December 31, 2006, a foreign insurance company must compute its estimated tax payments by adding to its income other than net investment income the greater of (i) its net investment income as determined under section 842(b)(5), that is actually effectively connected with the conduct of a trade or business within the United States for the relevant period, or (ii) the minimum effectively connected net investment income under section 842(b) that would result from using the most recently available domestic asset/liability percentage and domestic investment yield. Thus, for installment payments due after the publication of this revenue procedure, the domestic asset/liability percentages and the domestic investment yields provided in this revenue procedure must be used to compute the minimum effectively connected net investment income. However, if the due date of an installment is less than 20 days after the date this revenue procedure is published in the Internal Revenue Bulletin, the asset/liability percentages and domestic investment yields provided in Rev. Proc.

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of tax liability.

Rev. Proc. 2008–53