SECTION 6. DEPRECIATION — Internal Revenue Bulletin 2011-4

OR AMORTIZATION (§ 56(a)(1), 56(g)(4)(A), 167, 168, 197, 280F(a), 1400I, 1400L, or 1400N(d), OR FORMER § 168)

.01 Impermissible to permissible method of accounting for depreciation or amortization .

(1) Description of change . (a) Applicability . This change applies to a taxpayer that wants to change from an impermissible to a permissible method 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 tax

payer 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.

(i) any property to which § 1016(a)(3) (regarding property held by a tax-exempt organization) applies;

(ii) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to change its method of accounting under this section 6.01 of the APPENDIX if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction with a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable); (iii) any property for which a taxpayer is making a change in depreciation under § 1.446–1(e)(2)(ii)( d )( 2 )( vi ) or ( vii );

(iv) any property subject to § 167(g) regarding property depreciated under the income forecast method;

(v) any § 1250 property that a taxpayer is reclassifying to an asset class of Rev. Proc. 87–56, 1987–2 C.B. 674 (as clarified and modified by Rev. Proc. 88–22, 1988–1 C.B. 785), or Rev. Proc. 83–35, 1983–1 C.B. 745, as appropriate, that does not explicitly include § 1250 property (for example, asset class 57.0, Distributive Trades and Services);

(vi) any property for which a taxpayer is revoking a timely valid election, or making a late election, under § 167, § 168, § 179, §1400I, § 1400L(c), former § 168, § 13261(g)(2) or (3) of the Revenue Reconciliation Act of 1993 (1993 Act), 1993–3 C.B. 1, 128 (relating to amortizable § 197 intangibles), or any additional first year depreciation deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)). A taxpayer may request consent to revoke or make the election by submitting a request for a letter ruling under Rev. Proc. 2011–1, 2011–1 I.R.B. 1 (or successor). However, if a taxpayer is revoking or making an election under

January 24, 2011 361 2011–4 I.R.B.

as appropriate, Rev. Proc. 87–56 or Rev. Proc. 83–35. If the taxpayer is the owner and lessor of the item of property at issue, the statement of the facts and law supporting the new asset class also must describe the business or income-producing activity in which that item of property is primarily used by the lessee;

(iv) to the extent not provided elsewhere on the application, a statement identifying the year in which the item of property was placed in service by the taxpayer;

(v) if any item of property is public utility property within the meaning of § 168(i)(10) or former § 167(I)(3)(A), as applicable, a statement providing that the taxpayer agrees to the following additional terms and conditions:

(A) a normalization method of accounting (within the meaning of former § 167(I)(3)(G), former § 168(e)(3)(B), or § 168(i)(9), as applicable) will be used for the public utility property subject to the application;

(B) as of the beginning of the year of change, the taxpayer will adjust its deferred tax reserve account or similar reserve account in the taxpayer’s regulatory books of account by the amount of the deferral of federal income tax liability associated with the § 481(a) adjustment applicable to the public utility property subject to the application; and

(C) within 30 calendar days of filing the federal income tax return for the year of change, the taxpayer will provide a copy of the completed application to any regulatory body having jurisdiction over the public utility property subject to the application;

(vi) if the taxpayer is changing the classification of an item of § 1250 property placed in service after August 19, 1996, to a retail motor fuels outlet under § 168(e)(3)(E)(iii), a statement containing the following representation: “For purposes of § 168(e)(3)(E)(iii) of the Internal Revenue Code, the taxpayer represents that (A) 50 percent or more of the gross revenue generated from the item of § 1250 property is from the sale of petroleum products (not including gross revenue from related services, such as the labor cost of oil changes and gross revenue from the sale of nonpetroleum products such as tires and oil filters), (B) 50 percent or more of the floor space in the item of property

as § 263(a)) and including salvage proceeds in taxable income (see section 6.02 of this APPENDIX for making this change for property for which depreciation is determined under § 167);

(xii) any change in method of accounting involving both a change from treating the cost or other basis of the property as nondepreciable or nonamortizable property to treating the cost or other basis of the property as depreciable or amortizable property and the adoption of a method of accounting for depreciation requiring an election under § 167, § 168, §1400I, § 1400L(c), former § 168, § 13261(g)(2) or (3) of the 1993 Act, or any additional first year depreciation deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)) (for example, a change in the treatment of the space consumed in landfills placed in service in 2006 from nondepreciable to depreciable property (assuming section 6.01(1)(c)(xiii) of the APPENDIX does not apply) and the making of an election under §168(f)(1) to depreciate this property under the unit of production method of depreciation under § 167);

(xiii) any change in method of accounting for any item of income or deduction other than depreciation, even if the change results in a change in computing depreciation under § 1.446–1(e)(2)(ii)( d )( 2 )( i ), ( ii ), ( iii ), ( iv ), ( v ), ( vi ), ( vii ), or ( viii ). For example, a change in method of accounting involving:

(A) a change in inventory costs (for example, when property is reclassified from inventory property to depreciable property, or vice versa ) (but see section 10.02 of this APPENDIX for making a change in method of accounting from inventory property to depreciable property for unrecoverable line pack gas or unrecoverable cushion gas, and section 10.06 of this APPENDIX for making a change in method of accounting from inventory property to depreciable property for rotable spare parts); or

(B) a change in the character of a transaction from sale to lease, or vice versa (but see section 6.03 of this APPENDIX for making this change);

(xiv) a change from determining depreciation under § 168 to determining depreciation under former § 168 for any property subject to the transition rules in

§ 203(b) or § 204(a) of the Tax Reform Act of 1986, 1986–3 (Vol. 1) C.B. 1, 60–80;

(xv) any change in the placed-in-service date of a depreciable or amortizable property. This change is corrected by adjustments in the applicable taxable year provided under § 1.446–1(e)(2)(ii)( d )( 5 )( v ); or

(xvi) any property for which the rehabilitation credit under § 47 was claimed and that a taxpayer is reclassifying to 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, or water utility property (other than real property with a class life of more than 12.5 years).

(2) Certain scope limitations inappli- cable . The scope limitations in sections 4.02(4) and 4.02(5) of this revenue procedure are not applicable to this change.

(3) Additional requirements . A taxpayer also must comply with the following:

(a) Permissible method of accounting for depreciation . A taxpayer must change to a permissible method of accounting for depreciation for the item of depreciable or amortizable property. The permissible method of accounting is the same method that determines the depreciation allowable for the item of property (as provided in section 6.01(6) of this APPENDIX).

(b) Statements required . A taxpayer must provide the following statements, if applicable, and attach them to the completed application:

(i) a detailed description of the former and new methods of accounting. A general description of these methods of accounting is unacceptable (for example, MACRS to MACRS, erroneous method to proper method, claiming less than the depreciation allowable to claiming the depreciation allowable);

(ii) to the extent not provided elsewhere on the application, a statement describing the taxpayer’s business or income-producing activities. Also, if the taxpayer has more than one business or income-producing activity, a statement describing the taxpayer’s business or income-producing activity in which the item of property at issue is primarily used by the taxpayer;

(iii) to the extent not provided elsewhere on the application, a statement of the facts and law supporting the new method of accounting, new classification of the item of property, and new asset class in,

2011–4 I.R.B. 362 January 24, 2011

depreciation method for the property, under the straight-line depreciation method.

For determining the estimated useful life and salvage value of the property, see § 1.167(a)–1(b) and (c) respectively.

The depreciation allowable for any taxable year for property subject to § 167(f) (regarding certain property excluded from § 197) is determined by using the depreciation method and useful life prescribed in § 167(f). If computer software is depreciated under § 167(f)(1) and is qualified property (as defined in § 168(k)(2) and § 1.168(k)–1), 50-percent bonus depreciation property (as defined in § 168(k)(4) and § 1.168(k)–1), qualified disaster assistance property (as defined in § 168(n)(2)), qualified New York Liberty Zone (Liberty Zone) property (as defined in § 1400L(b)(2) and § 1.1400L(b)–1), qualified Gulf Opportunity Zone (GO Zone) property (as defined in § 1400N(d)(2) and sections 2.02 and 2.03 of Notice 2006–77, 2006–2 C.B. 590, as clarified, modified, and amplified by Notice 2007–36, 2007–1 C.B. 1000), specified Gulf Opportunity Zone extension property (GO Zone extension property) (as defined in § 1400N(d)(6) and section 4 of Notice 2007–36), or qualified Recovery Assistance (RA) property (as defined in sections 2.02 and 2.03 of Notice 2008–67, 2008–32 I.R.B. 307), the depreciation allowable for that computer software under § 167(f)(1) is also determined by taking into account the additional first year depreciation deduction provided by § 168(k), § 168(n), § 1400L(b), or § 1400N(d), or by § 15345(a)(1) and (d)(1) of the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110–246, 122 Stat. 1651 (June 18, 2008), as applicable, unless the taxpayer made a timely valid election not to deduct any additional first year depreciation for the computer software.

(e) Section 168 property . The depreciation allowable for any taxable year for property for which depreciation is determined under § 168, is determined as follows:

(i) by using either: (A) the general depreciation system in § 168(a); or

(B) the alternative depreciation system in § 168(g) if the property is required to be depreciated under the alternative depreciation system pursuant to § 168(g)(1) or other provisions of the Code (for exam

is devoted to the sale of petroleum products (not including floor space devoted to related services, such as oil changes and floor space devoted to nonpetroleum products such as tires and oil filters), or (C) the item of § 1250 property is 1,400 square feet or less.”; and

(vii) if the taxpayer is changing the classification of an item of property from § 1250 property to § 1245 property under § 168 or former § 168, a statement of the facts and law supporting the new § 1245 property classification, and a statement containing the following representation: “Each item of depreciable property that is the subject of the application filed under section 6.01 of the APPENDIX of Rev. Proc. 2011–14 for the year of change beginning [ Insert the date], and that is reclassified from [ Insert, as appropriate: nonresidential real property, residential rental property, qualified leasehold im- provement property, qualified restaurant property, qualified retail improvement property, 19-year real property, 18-year real property, or 15-year real property ] to an asset class of [ Insert, as appropri- ate, either: Rev. Proc. 87–56, 1987–2 C.B. 674, or Rev, Proc, 83–35, 1983–1 C.B. 745 ] that does not explicitly include § 1250 property, is § 1245 property for depreciation purposes.”

(4) Section 481(a) adjustment . Because the adjusted basis of the property is changed as a result of a method change made under section 6.01 of the APPENDIX ( see section 6.01(5) of this APPENDIX), items are duplicated or omitted. Accordingly, this change is made with a § 481(a) adjustment. This adjustment may result in either a negative § 481(a) adjustment (a decrease in taxable income) or a positive § 481(a) adjustment (an increase in taxable income) and may be a different amount for regular tax, alternative minimum tax, and adjusted current earnings purposes. This § 481(a) adjustment equals the difference between the total amount of depreciation taken into account in computing taxable income for the property under the taxpayer’s former method of accounting (including the amount attributable to any property described in section 6.01(1)(b) of this APPENDIX that is included in the taxpayer’s Form 3115), and the total amount of depreciation allowable for the property under the taxpayer’s new method of accounting (as

determined under section 6.01(6) of this APPENDIX, and including the amount attributable to any property described in section 6.01(1)(b) of this APPENDIX that is included in the taxpayer’s Form 3115), for open and closed years prior to the year of change. However, the amount of the § 481(a) adjustment must be adjusted to account for the proper amount of the depreciation allowable that is required to be capitalized under any provision of the Code (for example, § 263A) at the beginning of the year of change.

(5) Basis adjustment . As of the beginning of the year of change, the basis of depreciable property to which section 6.01 of this APPENDIX applies must reflect the reductions required by § 1016(a)(2) for the depreciation allowable for the property (as determined under section 6.01(6) of this APPENDIX).

(6) Meaning of depreciation allowable . (a) In general . Section 6.01(6) of this APPENDIX provides the amount of the depreciation allowable determined under § 56(a)(1), § 56(g)(4)(A), § 167, § 168, § 197, §1400I, or § 1400L(c), or former § 168. This amount, however, may be limited by other provisions of the Code (for example, § 280F).

(b) Section 56(a)(1) property . The depreciation allowable for any taxable year for property for which depreciation is determined under § 56(a)(1) is determined by using the depreciation method, recovery period, and convention provided for under § 56(a)(1) that applies for the property’s placed-in-service date.

(c) Section 56(g)(4)(A) property . The depreciation allowable for any taxable year for property for which depreciation is determined under § 56(g)(4)(A) is determined by using the depreciation method, recovery period or useful life, as applicable, and convention provided for under § 56(g)(4)(A) that applies for the property’s placed-in-service date.

(d) Section 167 property . Generally, for any taxable year, the depreciation allowable for property for which depreciation is determined under § 167, is determined either:

(i) under the depreciation method adopted by the taxpayer for the property; or

(ii) if that depreciation method does not result in a reasonable allowance for depreciation or the taxpayer has not adopted a

January 24, 2011 363 2011–4 I.R.B.

depreciation allowable for any taxable year for qualified New York Liberty Zone leasehold improvement property (as defined in § 1400L(c)(2)) is determined by using the depreciation method and recovery period prescribed in § 1400L(c) unless the taxpayer made a timely valid election under § 1400L(c)(5) not to use that recovery period.

(7) Concurrent automatic change . (a) A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment and a single positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment. For example, a taxpayer files a single Form 3115 to change the depreciation methods, recovery periods, and/or conventions under § 168(a) resulting from the reclassification of two computers from nonresidential real property to 5-year property, one office desk from nonresidential real property to 7-year property, and two office desks from 5-year property to 7-year property. On that Form 3115, the taxpayer must provide either (i) a single net § 481(a) adjustment that covers all the changes resulting from all of these reclassifications, or (ii) a single negative § 481(a) adjustment that covers the changes resulting from the reclassifications of the two computers and one office desk from nonresidential real property to 5-year property and 7-year property, respectively, and a single positive § 481(a) adjustment that covers the changes resulting from the reclassifications of the two office desks from 5-year property to 7-year property.

(b) A taxpayer that wants to make both this change and a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable) for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter the designated automatic accounting method change numbers

ple, property described in § 263A(e)(2)(A) or § 280F(b)(1)). Property required to be depreciated under the alternative depreciation system pursuant to § 168(g)(1) includes property in a class (as set out in § 168(e)) for which the taxpayer made a timely valid election under § 168(g)(7);

(ii) if the property is qualified property, 50-percent bonus depreciation property, qualified disaster assistance property, Liberty Zone property, GO Zone property, GO Zone extension property, or RA property, by also taking into account the additional first year depreciation deduction provided by § 168(k), § 168(n), § 1400L(b), or § 1400N(d), or by § 15345(a)(1) and (d)(1) of the Food, Conservation, and Energy Act of 2008, as applicable, unless the taxpayer made a timely valid election not to deduct the additional first year depreciation (or made a deemed election not to deduct the additional first year depreciation; for further guidance, see Rev. Proc. 2002–33, 2002–1 C.B. 963, Rev. Proc. 2003–50, 2003–2 C.B. 119, or Notice 2006–77) for the class of property (as defined in § 1.168(k)–1(e)(2), § 1.1400L(b)–1(e)(2), or section 4.02 of Notice 2006–77, as applicable) in which that property is included;

(iii) if the property is qualified cellulosic biofuel plant property (as defined in § 168(l)(2)), by also taking into account the additional first year depreciation deduction provided by § 168(l)(1), unless the taxpayer made a timely valid election not to deduct the additional first year depreciation for the property; and

(iv) if the property is qualified reuse and recycling property (as defined in § 168(m)(2)), by also taking into account the additional first year depreciation deduction provided by § 168(m)(1), unless the taxpayer made a timely valid election not to deduct the additional first year depreciation for the property.

(f) Section 197 property . The depreciation allowable for any taxable year for an amortizable § 197 intangible (including any property for which a timely election under § 13261(g)(2) of the 1993 Act was made) is determined in accordance with § 1.197–2(f).

(g) Former § 168 property . The depreciation allowable for any taxable year for property subject to former § 168 is determined by using either:

(i) the accelerated method of cost recovery applicable to the property (for example, for 5-year property, the recovery method under former § 168(b)(1)); or

(ii) the straight-line method applicable to the property if the property is required to be depreciated under the straight-line method (for example, property described in former § 168(f)(2) or former § 280F(b)(2)) or if the taxpayer elected to determine the depreciation allowance under the optional straight-line percentage (for example, the straight-line method in former § 168(b)(3)).

(h) Qualified revitalization building . The depreciation allowable for any taxable year for any qualified revitalization building (as defined in § 1400I(b)(1)) for which the taxpayer has made a timely valid election under § 1400I(a) is determined as follows:

(i) if the taxpayer elected to deduct onehalf of any qualified revitalization expenditures (as defined in § 1400I(b)(2) and as limited by § 1400I(c)) chargeable to a capital account with respect to the qualified revitalization building for the taxable year in which the building is placed in service by the taxpayer, the depreciation allowable for the qualified revitalization building’s placed-in-service year is equal to one-half of the qualified revitalization expenditures for the building and the depreciation allowable for the remaining depreciable basis of the qualified revitalization building for its placed-in-service year and subsequent taxable years is determined using the general depreciation system of § 168(a) or the alternative depreciation system of § 168(g), as applicable; or

(ii) if the taxpayer elected to amortize all of the qualified revitalization expenditures chargeable to a capital account with respect to the qualified revitalization building ratably over the 120-month period beginning with the month in which the building is placed in service, the depreciation allowable for the qualified revitalization expenditures is determined in accordance with this election and the depreciation allowable for the remaining depreciable basis of the qualified revitalization building is determined using the general depreciation system of § 168(a) or the alternative depreciation system of § 168(g), as applicable.

(i) Qualified New York Liberty Zone leasehold improvement property . The

2011–4 I.R.B. 364 January 24, 2011

made prospectively and are not permitted under the cited regulations for property for which the depreciation is determined under § 168, § 1400I, § 1400L(c), former § 168, or any additional first year depreciation deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)); or

(ix) any distributor commissions (as defined by section 2 of Rev. Proc. 2000–38, 2000–2 C.B. 310, as modified by Rev. Proc. 2007–16, 2007–1 C.B. 358) for which the taxpayer is changing the useful life under the distribution fee period method or the useful life method (both described in Rev. Proc. 2000–38). A change in this useful life is corrected by adjustments in the applicable taxable year provided under § 1.446–1(e)(2)(ii)( d )( 5 )( iv ).

(3) Certain scope limitations inappli- cable . The scope limitations in sections 4.02(4) and 4.02(5) of this revenue procedure are not applicable to this change.

(4) Changes covered . Section 6.02 of this APPENDIX only applies to the following changes in methods of accounting for depreciation:

(a) a change from the straight-line method to the sum-of-the-year-digits method, the sinking fund method, the unit-of-production method, or the declining-balance method using any proper percentage of the straight-line rate;

(b) a change from the declining-balance method using any percentage of the straight-line rate to the sum-of-the-yearsdigits method, the sinking fund method, or the declining-balance method using a different proper percentage of the straightline rate;

(c) a change from the sum-of-the-yearsdigits method to the sinking fund method, the declining-balance method using any proper percentage of the straight-line rate, or the straight-line method;

(d) a change from the unit-of-production method to the straight-line method;

(e) a change from the sinking fund method to the straight-line method, the unit-of-production method, the sum-of-the-years-digits method, or the declining-balance method using any proper percentage of the straight-line rate;

(f) a change in the interest factor used in connection with a compound interest method or sinking fund method;

(g) a change in averaging convention as set forth in § 1.167(a)–10(b). However, as

for both changes on the appropriate line on that Form 3115.

(c) A taxpayer that wants to make this change and a change in depreciation under section 6.04 (modern golf course greens), 6.05 (original and replacement tire costs), 6.06 (gas pump canopies), and/or 6.07 (utility assets) for the same year of change should file a single Form 3115 for these changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for these changes on the appropriate line on that Form 3115.

(8) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.01 of the APPENDIX must file a signed copy of its completed Form 3115 with the Internal Revenue Service in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(9) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.01 of this APPENDIX is “7.” See section 6.02(4) of this revenue procedure. (10) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .02 Permissible to permissible method of accounting for depreciation .

(1) Description of change . This change applies to a taxpayer that wants to change from a permissible method of accounting for depreciation under § 56(g)(4)(A)(iv) or § 167 to another permissible method of accounting for depreciation under § 56(g)(4)(A)(iv) or § 167. Pursuant to § 1.167(a)–7(a) and (c), a taxpayer may account for depreciable property either by treating each individual asset as an account or by combining two or more assets in a single account and, for each account, depreciation allowances are computed separately.

(2) Scope . (a) Applicability . This change applies to any taxpayer wanting to make a change

in method of accounting for depreciation specified in section 6.02(4) of this APPENDIX for the property in an account:

(i) for which the present and proposed methods of accounting for depreciation specified in section 6.02(4) of this APPENDIX are permissible methods for the property under § 56(g)(4)(A)(iv) or § 167; and

(ii) that is owned by the taxpayer at the beginning of the year of change.

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

(i) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to change its method of accounting under this section 6.02 of the APPENDIX if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction with a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable);

(ii) any property to which § 1016(a)(3) (regarding property held by a tax-exempt organization) applies;

(iii) any property described in § 167(f) (regarding certain property excluded from § 197);

(iv) any property subject to § 167(g) (regarding property depreciated under the income forecast method);

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

(vi) any property that the taxpayer elected under § 168(f)(1) or former § 168(e)(2) to exclude from the application of, respectively, § 168 or former § 168;

(vii) any property for which depreciation is determined in accordance with § 1.167(a)–11 (ADR);

(viii) any depreciable property for which the taxpayer is changing the depreciation method pursuant to § 1.167(e)–1(b) (change from declining-balance method to straight-line method), § 1.167(e)–1(c) (certain changes for § 1245 property), or § 1.167(e)–1(d) (certain changes for § 1250 property). These changes must be

January 24, 2011 365 2011–4 I.R.B.

(6) Section 481(a) adjustment . Because the adjusted basis of the property is not changed as a result of a method change made under section 6.02 of this APPENDIX, no items are being duplicated or omitted. Accordingly, a § 481(a) adjustment is neither required nor necessary.

(7) Concurrent automatic change . (a) A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets.

(8) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.02 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(9) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.02 of this APPENDIX is “8.” See section 6.02(4) of this revenue procedure. (10) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .03 Sale, lease, or financing transactions .

(1) Description of change and scope . (a) Applicability . This change applies to a taxpayer that wants to change its method of accounting from:

(i) improperly treating property as sold by the taxpayer to properly treating property as leased or financed by the taxpayer;

(ii) improperly treating property as leased by the taxpayer to properly treating

specifically provided in § 1.167(a)–10(b), in any taxable year in which an averaging convention substantially distorts the depreciation allowance for the taxable year, it may not be used ( see Rev. Rul. 73–202, 1973–1 C.B. 81); (h) a change from charging the depreciation reserve with costs of removal and crediting the depreciation reserve with salvage proceeds to deducting costs of removal as an expense and including salvage proceeds in taxable income as set forth in § 1.167(a)–8(e)(2). See Rev. Rul. 74–455, 1974–2 C.B. 63. This change, however, may be made under this revenue procedure only if:

(i) the change is applied to all items in the account for which the change is being made; and

(ii) the removal costs are not required to be capitalized under any provision of the Code (for example, § 263(a), 263A, or 280B); (i) a change from crediting the depreciation reserve with the salvage proceeds realized on normal retirement sales to computing and recognizing gains and losses on the sales ( see Rev. Rul. 70–165, 1970–1 C.B. 43);

(j) a change from crediting ordinary income (including the combination method of crediting the lesser of estimated salvage value or actual salvage proceeds to the depreciation reserve, with any excess of salvage proceeds over estimated salvage value credited to ordinary income) with the salvage proceeds realized on normal retirement sales, to computing and recognizing gains and losses on the sales ( see Rev. Rul. 70–166, 1970–1 C.B. 44); (k) a change from item accounting for specific assets to multiple asset accounting (pooling) for the same assets, or vice versa ;

(l) a change from one type of multiple asset accounting (pooling) for specific assets to a different type of multiple asset accounting (pooling) for the same assets;

(m) a change from one method described in Rev. Proc. 2000–38 for amortizing distributor commissions (as defined by section 2 of Rev. Proc. 2000–38) to another method described in Rev. Proc. 2000–38 for amortizing distributor commissions; or

(n) a change from pooling to a single asset, or vice versa, for distributor commissions (as defined by section 2 of Rev. Proc. 2000–38) for which the taxpayer is using

the distribution fee period method or the useful life method (both described in Rev. Proc. 2000–38).

(5) Additional requirements . A taxpayer also must comply with the following:

(a) Basis for depreciation . At the beginning of the year of change, the basis for depreciation of property to which this change applies is the adjusted basis of the property as provided in § 1011 at the end of the taxable year immediately preceding the year of change (determined under taxpayer’s present method of accounting for depreciation). If applicable under the taxpayer’s proposed method of accounting for depreciation, this adjusted basis is reduced by the estimated salvage value of the property (for example, a change to the straight-line method).

(b) Rate of depreciation . The rate of depreciation for property changed to:

(i) the straight-line or the sum-of-theyear-digits method of depreciation must be based on the remaining useful life of the property as of the beginning of the year of change; or

(ii) the declining-balance method of depreciation must be based on the useful life of the property measured from the placedin-service date, and not the expected remaining life from the date the change becomes effective.

(c) Regulatory requirements . For changes in method of depreciation to the sum-of-the-year-digits or declining-balance method, the property must meet the requirements of § 1.167(b)–0 or 1.167(c)–1, as appropriate. (d) Public utility property . If any item of property is public utility property within the meaning of former § 167(l)(3)(A), the taxpayer must attach to the application a statement providing that the taxpayer agrees to the following additional terms and conditions:

(i) a normalization method of accounting within the meaning of former § 167(l)(3)(G) will be used for the public utility property subject to the application; and

(ii) within 30 calendar days of filing the federal income tax return for the year of change, the taxpayer will provide a copy of the completed application to any regulatory body having jurisdiction over the public utility property subject to the application.

2011–4 I.R.B. 366 January 24, 2011

1987–2 C.B. 674, as clarified and modified by Rev. Proc. 88–22, 1988–1 C.B. 785.

(3) Concurrent automatic change . (a) A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment and a single positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment. (b) A taxpayer that wants to make this change and a change in depreciation under section 6.01 (impermissible to permissible method of accounting for depreciation or amortization), 6.05 (original and replacement tire costs), 6.06 (gas pump canopies), and/or 6.07 (utility assets) for the same year of change should file a single Form 3115 for these changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for these changes on the appropriate line of that Form 3115.

(4) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.04 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.04 of this APPENDIX is “11.” See section 6.02(4) of this revenue procedure. (6) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call).

property as sold or financed by the taxpayer;

(iii) improperly treating property as financed by the taxpayer to properly treating property as sold or leased by the taxpayer;

(iv) improperly treating property as purchased by the taxpayer to properly treating property as leased by the taxpayer; and

(v) improperly treating property as leased by the taxpayer to properly treating property as purchased by the taxpayer.

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

(i) a rent-to-own dealer that wants to change its method of accounting for rentto-own contracts described in section 3 of Rev. Proc. 95–38, 1995–2 C.B. 397; or

(ii) a taxpayer that holds assets for sale or lease, if any asset so held is not the subject of a sale or lease transaction as of the beginning of the year of change.

(2) Manner of making change . (a) The change in method of accounting under section 6.03 of this APPENDIX is made using a cut-off method and applies to transactions entered into on or after the beginning of the year of change. See section 2.06 of this revenue procedure.

(b) If a taxpayer wants to change its method of accounting for existing sale, lease or financing transactions, the taxpayer must file an application with the Commissioner in accordance with the requirements of § 1.446–1(e)(3)(i) and Rev. Proc. 97–27. A change involving existing sale, lease, or financing transactions will require a § 481(a) adjustment. The Service will generally not consider a taxpayer’s request to change a method of accounting for an existing sale, lease, or financing transaction unless the taxpayer’s proposed method of accounting is consistent with the method used by the counterparty to the agreement. The following information should be submitted with Form 3115 to substantiate that the taxpayer’s proposed method is consistent with the counterparty’s method: (A) the name of the counterparty to the transaction; and (B) a representation, signed under penalties of perjury, from the counterparty that provides the method of accounting for the agreement used by the counterparty for federal income tax purposes. If a taxpayer does not submit the counterparty information, the taxpayer’s request to change a method of accounting for an existing sale, lease, or financing transaction will be con

sidered only in unusual and compelling circumstances. The requirement to obtain counterparty information from multiple counterparties will not be considered unusual or compelling.

(3) No audit protection . A taxpayer does not receive audit protection under section 7 of this revenue procedure in connection with this change.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.03 of this APPENDIX is “10.” See section 6.02(4) of this revenue procedure. (5) Contact information . For further information regarding a change under this section, contact Edward Schwartz at 202–622–4960 (not a toll-free call). .04 Modern golf course greens . (1) Description of change . This change applies to a taxpayer that wants to change its method of accounting for the cost of modern golf course greens owned by the taxpayer at the beginning of the year of change to conform with the holding in Rev. Rul. 2001–60, 2001–2 C.B. 587. Rev. Rul. 2001–60 holds that the costs of land preparation undertaken by a taxpayer in the original construction or reconstruction of modern greens (as described in Rev. Rul. 2001–60) that is so closely associated with depreciable assets, such as a network of underground drainage tiles or pipes, that the land preparation will be retired, abandoned, or replaced contemporaneously with those depreciable assets are to be capitalized and depreciated over the recovery period of the depreciable assets with which the land preparation is associated. However, the general earthmoving, grading, and initial shaping of the area surrounding and underneath the modern green that occur before the construction are inextricably associated with the land and, therefore, the costs attributable to this land preparation are added to the taxpayer’s cost basis in the land and are not depreciable.

(2) Additional requirements . A taxpayer that changes its method of accounting for the cost of modern golf course greens under section 6.04 of this APPENDIX must change to a permissible method of accounting for depreciation of modern greens. For purposes of § 168, the modern green is includible in asset class 00.3, Land Improvements, of Rev. Proc. 87–56,

January 24, 2011 367 2011–4 I.R.B.

a single net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment and a single positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment. (b) A taxpayer that wants to make this change and a change in depreciation under section 6.01 (impermissible to permissible method of accounting for depreciation or amortization), 6.04 (modern golf course greens), 6.05 (original and replacement tire costs), and/or 6.07 (utility assets) for the same year of change should file a single Form 3115 for these changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for these changes on the appropriate line on that Form 3115.

(4) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.06 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.06 of this APPENDIX is “13.” See section 6.02(4) of this revenue procedure. (6) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .07 Depreciation of utility assets . (1) Description of change . This change applies to a taxpayer that wants to change the method of accounting for depreciable assets that are owned by a utility at the beginning of the year of change and used in the general business operations of the

.05 Original and replacement tire costs .

(1) Description of change . This change applies to a taxpayer that wants to change the method of accounting for the cost of original and replacement tires for all of the taxpayer’s qualifying vehicles in which the taxpayer has a depreciable interest at the beginning of the year of change to the original tire capitalization method provided by section 5 of Rev. Proc. 2002–27, 2002–1 C.B. 802. The terms “qualifying vehicle,” “original tires,” and “replacement tires” are defined in section 3 of Rev. Proc. 2002–27. For further details, see Rev. Proc. 2002–27.

(2) Concurrent automatic change . (a) A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment and a single positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment. (b) A taxpayer that wants to make this change and a change in depreciation under section 6.01 (impermissible to permissible method of accounting for depreciation or amortization), 6.04 (modern golf course greens), 6.06 (gas pump canopies), and/or 6.07 (utility assets) for the same year of change should file a single Form 3115 for these changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for these changes on the appropriate line on that Form 3115.

(3) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.05 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year

of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.05 of this APPENDIX is “12.” See section 6.02(4) of this revenue procedure. (5) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .06 Depreciation of gas pump canopies . (1) Description of change . This change applies to a taxpayer that wants to change the method of accounting for the cost of stand-alone gasoline pump canopies or their supporting concrete footings owned by the taxpayer at the beginning of the year of change to conform with the holding in Rev. Rul. 2003–54, 2003–1 C.B. 982. Rev. Rul. 2003–54 holds that the stand-alone gasoline pump canopies (as described in Rev. Rul. 2003–54) are not inherently permanent structures and are classified as tangible personal property for depreciation purposes, while the supporting concrete footings (as described in Rev. Rul. 2003–54) are inherently permanent structures classified as land improvements for depreciation purposes.

(2) Additional requirements . A taxpayer that changes its method of accounting for the cost of stand-alone gasoline pump canopies or their supporting concrete footings under section 6.06 of this APPENDIX must change to a permissible method of accounting for depreciation of the cost of the gasoline pump canopies or the supporting concrete footings. For purposes of § 168, the stand-alone gasoline pump canopies are includible in asset class 57.0, Distributive Trades and Services, of Rev. Proc. 87–56, 1987–2 C.B. 674, as clarified and modified by Rev. Proc. 88–22, 1988–1 C.B. 785, and their supporting concrete footings are includible in asset class 57.1, Distributive Trades and Services-Billboard, Service Station Buildings and Petroleum Marketing Land Improvements, of Rev. Proc. 87–56.

(3) Concurrent automatic change . (a) A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets and provide

2011–4 I.R.B. 368 January 24, 2011

automatic accounting method change number for a change under section 6.08 of this APPENDIX is “15.” See section 6.02(4) of this revenue procedure. (5) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .09 Change in general asset account treatment due to a change in the use of MACRS property .

(1) Description of change . This change applies to a taxpayer that wants to change the method of accounting for general asset account treatment of MACRS property (as defined in § 1.168(b)–1(a)(2)) to the method of accounting provided in §§ 1.168(i)–1(c)(2)(ii)(E) and 1.168(i)–1(h)(2), which applies when there is a change in the use of MACRS property pursuant to § 1.168(i)–4(d). See § 1.168(i)–1(l)(2)(ii).

(2) Manner of making change . The change is made on a modified cut-off basis (as defined in § 1.446–1(e)(2)(ii)( d )( 5 )( iii )) and, thus, the adjusted depreciable basis of the MACRS property as of the beginning of the year of change is recovered using the new method of accounting for general asset account treatment. Accordingly, a § 481(a) adjustment is neither permitted nor required. See § 1.168(i)–1(h)(2)(ii) and (iii) for more information regarding how to establish the general asset account when a change in the use of MACRS property occurs pursuant to § 1.168(i)–4(d).

(3) Concurrent automatic change . A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets.

(4) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.09 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

utility to conform with Rev. Rul. 2003–81, 2003–2 C.B. 126. (2) Concurrent automatic change . (a) A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment and a single positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment. (b) A taxpayer that wants to make this change and a change in depreciation under section 6.01 (impermissible to permissible method of accounting for depreciation or amortization), 6.04 (modern golf course greens), 6.05 (original and replacement tire costs), and/or 6.06 (gas pump canopies) for the same year of change should file a single Form 3115 for these changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for these changes on the appropriate line on that Form 3115.

(3) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.07 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.07 of this APPENDIX is “14.” See section 6.02(4) of this revenue procedure. (5) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call).

.08 Depreciation of cable TV fiber optics .

(1) Description of change . This change applies to a taxpayer that wants to change the method of accounting for depreciation of fiber optic node and trunk line consisting of fiber optic cable used in a cable television distribution system owned by the taxpayer at the beginning of the year of change to the safe harbor method of accounting provided by section 4 of Rev. Proc. 2003–63, 2003–2 C.B. 304. The taxpayer must operate a cable television distribution system designed to provide one-way and two-way communication services to subscribers (as described in section 3.02 of Rev. Proc. 2003–63). The safe harbor method of accounting provided by section 4 of Rev. Proc. 2003–63 determines the unit of property for calculating depreciation under §§ 167 and 168, and the primary use and placed-in-service date of that unit of property.

(2) Concurrent automatic change . A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment and a single positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment.

(3) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.08 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(4) Designated automatic accounting method change number . The designated

January 24, 2011 369 2011–4 I.R.B.

its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.11 of this APPENDIX is “89.” See section 6.02(4) of this revenue procedure. (5) Contact information . For further information regarding a change under this section, contact Bernard Harvey at 202–622–4930 (not a toll-free call). .12 Depreciation of qualified revitalization building in the expanded area of a renewal community .

(1) Description of change . This change applies to a taxpayer that wants to elect the commercial revitalization deduction under § 1400I(a) for a qualified revitalization building (as defined in § 1400I(b)(1)) that is placed in service by the taxpayer after December 31, 2001, in the area of a renewal community that was expanded by the U.S. Department of Housing and Urban Development and for which the taxpayer receives a retroactive commercial revitalization expenditure allocation made in accordance with section 3 of Rev. Proc. 2006–16, 2006–1 C.B. 539. This change applies only if the taxpayer filed the federal tax return for the placed-in-service year of that building on or before the date the taxpayer received the retroactive commercial revitalization expenditure allocation. For further details, see Rev. Proc. 2006–16. (2) Scope limitations inapplicable . The scope limitations in section 4.02 of this revenue procedure do not apply to this change.

(3) Time for making change . The change in method of accounting under section 6.12 of this APPENDIX must be timely filed with the taxpayer’s federal tax return for the taxable year that includes the date on which the commercial revitalization agency makes the retroactive commercial revitalization expenditure allocation, or with the taxpayer’s federal tax return for the first taxable year succeeding the taxable year that included the date on which the commercial revitalization agency made the retroactive commercial revitalization expenditure allocation.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.09 of this APPENDIX is “87.” See section 6.02(4) of this revenue procedure. (6) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .10 Change in method of accounting for depreciation due to a change in the use of MACRS property .

(1) Description of change . This change applies to a taxpayer that wants to (a) change the method of accounting for depreciation of MACRS property (as defined in § 1.168(b)–1(a)(2)) to the method of accounting for depreciation provided in § 1.168(i)–4, which applies when there is a change in the use of MACRS property, or (b) revoke the election provided in § 1.168(i)–4(d)(3)(ii) to disregard a change in the use of MACRS property. See § 1.168(i)–4(g)(2).

(3) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.10 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.10 of this APPENDIX is “88.” See section 6.02(4) of this revenue procedure. (5) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .11 Depreciation of qualified non-personal use vans and light trucks .

(1) Description of change . This change applies to a taxpayer that wants to change the method of accounting for depreciation for certain vehicles in accordance with § 1.280F–6(f)(2)(iv). Section 1.280F–6(f)(2)(iv) applies to a truck or van that is a qualified nonpersonal use vehicle as defined under § 1.274–5T(k), was placed in service by the taxpayer before July 7, 2003, and was treated by the taxpayer as a passenger automobile under § 1.280F–6T as in effect prior to July 7, 2003. If the taxpayer files Form 3115, in accordance with § 1.280F–6(f)(2)(iv), the treatment of the truck or van will be changed from property to which § 280F(a) applies to property to which § 280F(a) does not apply.

(3) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.11 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with

2011–4 I.R.B. 370 January 24, 2011

(ii) for which the taxpayer did not take into account any depreciation allowance, or did take into account some depreciation but less than the depreciation allowable (hereinafter, both are referred to as “claimed less than the depreciation allowable”), in the year of change (as defined in section 6.17(4) of this APPENDIX) or any prior taxable year.

(b) Inapplicability . Section 6.17 of this APPENDIX does not apply to:

(i) any property to which § 1016(a)(3) (regarding property held by a tax-exempt organization) applies;

(ii) any property for which a taxpayer is revoking a timely valid depreciation election, or making a late depreciation election, under the Code or regulations thereunder, or under other guidance published in the IRB (including under § 13261(g)(2) or (3) of the Revenue Reconciliation Act of 1993 (1993 Act), 1993–3 C.B. 1, 128 (relating to amortizable § 197 intangibles));

(iii) any property for which the taxpayer deducted the cost or other basis of the property as an expense; or

(iv) any property disposed of by the taxpayer in a transaction to which a nonrecognition section of the Code applies (for example, § 1031, transactions subject to § 168(i)(7)(B)). However, this section 6.17(2)(b)(iv) of the APPENDIX does not apply to property disposed of by the taxpayer in a § 1031 or § 1033 transaction if the taxpayer elects under § 1.168(i)–6(i) and (j) to treat the entire basis (that is, both the exchanged and excess basis (as defined in § 1.168(i)–6(b)(7) and (8), respectively) of the replacement MACRS property (as defined in § 1.168(i)–6(b)(1)) as property placed in service by the taxpayer at the time of replacement and treat the adjusted depreciable basis of the relinquished MACRS property (as defined in § 1.168(i)–6(b)(2)) as being disposed of by the taxpayer at the time of disposition.

(3) Manner of making the change . (a) Change made on an original return for the year of change . This change may be made on a taxpayer’s timely filed (including extensions) original federal tax return for the year of change (as defined in section 6.17(4) of this APPENDIX), provided the taxpayer files the original Form 3115 in accordance with section 6.02(3) of this revenue procedure.

(b) Change made on an amended return for the year of change . This change may

(4) Concurrent automatic change . A taxpayer that wants to make this change for more than one qualified revitalization building for the same year of change should file a single Form 3115 for all such buildings and provide a single net § 481(a) adjustment for all the changes included in that Form 3115.

(5) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.12 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(6) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.12 of this APPENDIX is “97.” See section 6.02(4) of this revenue procedure. (7) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .13 Loss disallowance rule upon a disposition of an insurance contract acquired in an assumption re-insurance transaction .

(1) Description of change . (a) Applicability . This change applies to a taxpayer that chooses, on a transaction-by-transaction basis, to change their treatment of certain insurance contracts acquired in an assumption reinsurance transaction under § 1.197–2(g)(5) for the first taxable year ending after April 10, 2006.

(b) Inapplicability . This change does not apply when the taxpayer’s treatment of its property is an issue under consideration for a taxable year under examination, before an Appeals office, or before a federal court. See section 3.09 of this revenue procedure for the definition of these terms.

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

(3) Additional requirements . The change in accounting method results in

items being omitted or duplicated and thus, an adjustment under § 481(a) must be computed.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.13 of this APPENDIX is “98.” See section 6.02(4) of this revenue procedure. (5) Contact information . For further information regarding a change under this section, contact Mark Weiss at 202–622–7750 (not a toll-free call).

.14 Reserved .

.15 Reserved .

.16 Reserved . .17 Impermissible to permissible method of accounting for depreciation or amortization for disposed depreciable or amortizable property .

(1) Description of change . This change applies to a taxpayer that wants to make the change in method of accounting for depreciation or amortization (depreciation) provided under section 3 of Rev. Proc. 2007–16, 2007–1 C.B. 358, for an item of depreciable or amortizable property that has been disposed of by the taxpayer. Section 3 of Rev. Proc. 2007–16 allows a taxpayer to make a change in method of accounting for depreciation for the disposed property if the taxpayer used an impermissible method of accounting for depreciation for the property under which the taxpayer did not take into account any depreciation allowance, or did take into account some depreciation but less than the depreciation allowable, in the year of change (as defined in section 6.17(4) of this APPENDIX) or any prior taxable year.

(2) Scope . (a) Applicability . Except as provided in section 6.17(2)(b) of this APPENDIX, section 6.17 of this APPENDIX applies to a taxpayer that is changing from an impermissible method of accounting for depreciation to a permissible method of accounting for depreciation for any item of depreciable or amortizable property subject to §§ 167, 168, 197, 1400I, or 1400L(c), to former § 168, or to any additional first year depreciation deduction provision of the Code (for example, § 168(k), § 168(l), § 1400L(b), or § 1400N(d)):

(i) that has been disposed of by the taxpayer during the year of change (as defined in section 6.17(4) of this APPENDIX); and

January 24, 2011 371 2011–4 I.R.B.

and the taxpayer’s applicable federal tax return has been filed on or before February 26, 2007. For further details, see § 1.168(i)–6(k)(2) and (3).

(3) Concurrent automatic change . A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment and a single positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment.

(4) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.18 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.18 of this APPENDIX is “116.” See section 6.02(4) of this revenue procedure. (6) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .19 Lessor improvements abandoned at termination of lease .

(1) Description of change . (a) Applicability . This change applies to a lessor that continued to depreciate under § 168 an improvement described in § 168(i)(8)(B)(i) and (ii) after the improvement was irrevocably disposed of or abandoned by the lessor at the termination of the applicable lease by the lessee and now wants to comply with § 168(i)(8)(B)

also be made on an amended federal tax return for the year of change (as defined in section 6.17(4) of this APPENDIX), provided:

(i) the taxpayer files the original Form 3115 with the taxpayer’s amended federal tax return for the year of change (as defined in section 6.17(4) of this APPENDIX) prior to the expiration of the period of limitation for assessment under § 6501(a) for the taxable year in which the item of depreciable or amortizable property was disposed of by the taxpayer; and

(ii) the taxpayer’s amended federal tax return for the year of change (as defined in section 6.17(4) of this APPENDIX) includes the adjustments to taxable income and any collateral adjustments to taxable income or tax liability (for example, adjustments to the amount or character of the gain or loss of the disposed depreciable or amortizable property) resulting from the change in method of accounting for depreciation made by the taxpayer under section 6.17 of this APPENDIX. (4) Year of change . The year of change for this change is the taxable year in which the item of depreciable or amortizable property was disposed of by the taxpayer.

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

(6) Filing requirements . Notwithstanding section 6.02(3)(a) of this revenue procedure, a taxpayer making this change in accordance with section 6.17(3)(b) of this APPENDIX must attach the original Form 3115 to the taxpayer’s timely filed amended federal tax return for the year of change and must file the required copy (with signature) of the Form 3115 with the national office no later than when the original Form 3115 is filed with the amended federal tax return for the year of change. If a taxpayer is making this change in accordance with section 6.17(3)(a) of this APPENDIX, the filing requirements in section 6.02(3)(a) of this revenue procedure apply.

(7) Section 481(a) adjustment period . A taxpayer must take the § 481(a) adjustment into account in the year of change.

(8) Concurrent automatic change . A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets.

(9) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.17 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(10) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.17 of this APPENDIX is “107.” See section 6.02(4) of this revenue procedure. (11) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .18 Depreciation of MACRS property acquired in a like-kind exchange or as a result of an involuntary conversion .

(1) Description of change . This change applies to a taxpayer that wants to make a change in method of accounting for depreciation under § 168 to either:

(a) Apply the provisions of § 1.168(i)–6, or rely on prior guidance by the Service for determining the depreciation deductions of replacement MACRS property and relinquished MACRS property, for a like-kind exchange or an involuntary conversion of MACRS property for which the time of disposition, the time of replacement, or both occur on or before February 27, 2004; or

(b) Apply § 1.168(i)–6(i)(2) to the relinquished property and the replacement property for which the time of disposition, the time of replacement, or both occur on or before February 26, 2007, if the replacement property replaces relinquished property for which the taxpayer made a valid election under § 168(f)(1) to exclude it from the application of § 168.

(2) Applicability . The change in section 6.18(1)(a) of this APPENDIX applies only if the taxpayer’s applicable federal tax return has been filed on or before February 27, 2004. The change in section 6.18(1)(b) of this APPENDIX applies only if the taxpayer wants to apply § 1.168(i)–6(i)(2)

2011–4 I.R.B. 372 January 24, 2011

(2) Establishment of pools . A taxpayer may change from item accounting to pooling for repairable and reusable spare parts by establishing one or more pools for repairable and reusable spare parts beginning in the year of change. Each pool must include only the repairable and reusable spare parts that are placed in service by the taxpayer in the same taxable year and have the same: (a) asset class under Rev. Proc. 87–56, 1987–2 C.B. 674, as clarified and modified by Rev. Proc. 88–22, 1988–1 C.B. 785, (b) applicable depreciation method, (c) applicable recovery period, and (d) applicable convention. Additionally, repairable and reusable spare parts subject to the mid-quarter convention may only be grouped into a pool with repairable and reusable spare parts that are placed in service in the same quarter of the taxable year.

Further, each pool for repairable and reusable spare parts placed in service by the taxpayer after 1986 and before the year of change must include a beginning balance for both the unadjusted depreciable basis and the depreciation reserve. The beginning balance for the unadjusted depreciable basis of each pool is equal to the sum of the unadjusted depreciable bases as of the beginning of the year of change for all repairable and reusable spare parts included in that pool. The beginning balance of the depreciation reserve of each pool is equal to the sum of the greater of the depreciation allowed or allowable as of the beginning of the year of change for all repairable and reusable spare parts included in that pool.

(3) Permissible methods of identifying disposed repairable and reusable spare parts . Beginning in the year of change, a taxpayer may change to one of the following methods of accounting to identify its disposed repairable and reusable spare parts:

(a) Specific identification of each disposed repairable and reusable spare part; or

(b) A first-in, first-out method of accounting if: (i) the taxpayer establishes pools for repairable and reusable spare parts in accordance with section 6.20(2) of this APPENDIX, (ii) the repairable and reusable spare parts are mass assets, and (iii) the total repairable and reusable spare parts dispositions during a particular taxable year are readily determined from the

by recognizing gain or loss upon the disposition or abandonment of the improvement. To qualify for recognizing gain or loss under § 168(i)(8)(B), the intent of the lessor must be irrevocably to discard the improvement so that it will neither be used again by the lessor nor retrieved by the lessor for resale, exchange, or other disposition. See § 1.167(a)–8(a)(4).

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

(i) improvements disposed of or abandoned before June 13, 1996;

(ii) the extent § 280B applies to the demolition of a structure, a portion of which may include leasehold improvements; or

(iii) improvements disposed of or abandoned before the termination of the applicable lease.

(2) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.19 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.19 of this APPENDIX is “117.” See section 6.02(4) of this revenue procedure. (4) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .20 Repairable and reusable spare parts .

(1) Description of change . (a) Applicability . This change applies to a taxpayer that wants to change from item accounting to multiple asset accounting (pooling) for its repairable and reusable spare parts in accordance with section 6.20(2) of this APPENDIX or that wants to change its method of identifying disposed repairable and reusable spare parts to a method described in section 6.20(3) of this APPENDIX. These changes apply to repairable and reusable

spare parts that: are owned by the taxpayer at the beginning of the year of change; are used to repair equipment owned by the taxpayer; are acquired by the taxpayer for a specific type of equipment at the time that the related equipment is acquired; usually have the same useful life as the related equipment; and have been placed in service by the taxpayer after 1986.

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

(i) a taxpayer that is currently capitalizing and depreciating the cost of its repairable and reusable spare parts and that elected to establish general asset accounts for the repairable and reusable spare parts;

(ii) a taxpayer that is not currently capitalizing and depreciating the cost of its repairable and reusable spare parts under § 168 in accordance with the holdings in Rev. Rul. 69–200, 1969–1 C.B. 60, and Rev. Rul. 69–201, 1969–1 C.B. 60, unless the taxpayer concurrently changes its method to properly capitalize and depreciate these costs in conjunction with a change under section 10.07 of this APPENDIX. Rev. Rul. 69–200 and Rev. Rul. 69–201 hold that repairable and reusable spare parts are tangible property for which depreciation is allowable at the time that the related equipment is placed in service by the taxpayer and the method of computing depreciation for the repairable and reusable spare parts is the same method of computing depreciation for the related equipment;

(iii) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to change its method of accounting under this section 6.20 of the APPENDIX if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction with a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable); or

(iv) a taxpayer that is using an impermissible method of accounting for depreciation for repairable and reusable spare parts or for the related equipment for which the repairable and reusable spare parts are acquired, unless the taxpayer concurrently changes its method to use a permissible method of accounting for depreciation under section 6.01 of this APPENDIX.

January 24, 2011 373 2011–4 I.R.B.

wants to change from depreciating a nondepreciable land improvement to not depreciating a nondepreciable land improvement. This change applies to any land or nondepreciable land improvement that is owned by the taxpayer at the beginning of the year of change.

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

(i) any depreciable land improvement; or

(ii) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to change its method of accounting under this section 6.21 of the APPENDIX if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction with a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable). (2) Concurrent automatic change . (a) A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets.

(3) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.21 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change in method of accounting under section 6.21 of this APPENDIX

taxpayer’s records but it is impracticable for the taxpayer to maintain records from which the taxpayer can determine the particular taxable year in which the disposed repairable and reusable spare parts were placed in service by the taxpayer. A taxpayer using the first-in, first-out method of accounting under this section 6.20(3) must identify the repairable and reusable spare parts disposed of in a taxable year from the pool with the earliest placed in-service year existing at the beginning of the taxable year of the disposition. For purposes of this section 6.20(3), mass assets are a mass or group of individual items of depreciable property:

(i) that are not necessarily homogeneous;

(ii) each of which is minor in value relative to the total value of the mass or group;

(iii) numerous in quantity; (iv) usually accounted for only on a total dollar or quantity basis;

(v) with respect to which separate identification is impracticable; and

(vi) are placed in service by the taxpayer in the same taxable year.

(4) Manner of making change . (a) Establishment of pools . Because the adjusted basis of the property is not changed as a result of changing from item accounting to pooling under section 6.20(2) of this APPENDIX, no items are being duplicated or omitted. Accordingly, a § 481(a) adjustment is neither required nor necessary.

(b) Identifying disposed repairable and reusable spare parts . The change to a method described in section 6.20(3) of this APPENDIX for identifying disposed repairable and reusable spare parts is made on a cut-off basis and applies only to repairable and reusable spare parts disposed of by the taxpayer beginning in 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.

(5) Concurrent automatic change . (a) A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets.

(b) A taxpayer that wants to make both this change and a change to a capitalization and depreciation method under section 10.07 of this APPENDIX for the same year of change should file a single Form

3115 for both changes, in which case the taxpayer must enter 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 both this change and a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable) for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(d) A taxpayer that wants to make both this change and a change to a permissible method of accounting for depreciation for repairable and reusable spare parts, or for the related equipment for which the repairable and reusable spare parts are acquired, under section 6.01 of this APPENDIX for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(6) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.20 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(7) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.20 of this APPENDIX is “118.” See section 6.02(4) of this revenue procedure. (8) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .21 Land . (1) Description of change . (a) Applicability . This change applies to a taxpayer that wants to change from depreciating land to not depreciating land or

2011–4 I.R.B. 374 January 24, 2011

this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .23 Tenant construction allowances . (1) Description of change and scope . (a) Applicability . This change applies to a taxpayer that wants to change its method of accounting for tenant construction allowances:

(i) from improperly treating the taxpayer as having a depreciable interest in the property subject to the tenant construction allowances for federal income tax purposes to properly treating the taxpayer as not having a depreciable interest in such property for federal income tax purposes; or

(ii) from improperly treating the taxpayer as not having a depreciable interest in the property subject to the tenant construction allowances for federal income tax purposes to properly treating the taxpayer as having a depreciable interest in such property for federal income tax purposes.

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

(i) any tenant construction allowance that qualifies under § 110;

(ii) any portion of a tenant construction allowance that is not expended on depreciable property; or

(iii) any amount expended for depreciable property in excess of the tenant construction allowance.

(2) Definition . For purposes of section 6.23 of this APPENDIX, the term “tenant construction allowance(s)” means any amount received by a lessee from a lessor to construct, acquire, or improve property for use by the lessee pursuant to a lease.

(3) Manner of making the change . (a) The change in method of accounting under section 6.23 of this APPENDIX is made using a cut-off method and only applies to leases entered into on or after the beginning of the year of change. See section 2.06 of this revenue procedure.

(b) If a taxpayer wants to change its method of accounting for tenant construction allowances under existing leases, the taxpayer must file a Form 3115 with the Commissioner in accordance with the requirements of § 1.446–1(e)(3)(i) and Rev. Proc. 97–27. A change involving tenant construction allowances under existing leases will require a § 481(a) adjustment. Consent to change a method of accounting for tenant construction allowances under

is “119.” See section 6.02(4) of this revenue procedure.

(5) Contact information . For further information regarding a change under this section, contact Douglas Kim at 202–622–4930 (not a toll-free call). .22 Kansas additional first year depreciation .

(1) Description of change . (a) In general . This change applies to a taxpayer that wants to make a change in method of accounting for depreciation for qualified Recovery Assistance (RA) property placed in service by the taxpayer on or after May 5, 2007, during the taxable year that includes May 5, 2007, to claim the Kansas additional first year depreciation deduction for a class of property for which the taxpayer did not claim the Kansas additional first year depreciation deduction on the taxpayer’s timely filed federal tax return for the taxable year that includes May 5, 2007, provided the taxpayer did not make an election not to deduct the Kansas additional first year depreciation for the class of property pursuant to section 4.03 of Notice 2008–67, 2008–32 I.R.B 307. For further details, see section 3.03 of Notice 2008–67

(b) Return for the first taxable year succeeding the taxable year that in- cludes May 5, 2007, not filed on or before August 11, 2008 . If, on or before August 11, 2008, the taxpayer did not file its federal tax return for the first taxable year succeeding the taxable year that includes May 5, 2007, and the taxpayer owns the property as of the first day of this taxable year, the taxpayer may file Form 3115 to make the change in method of accounting under section 6.22 of this APPENDIX with the taxpayer’s timely filed federal tax return for the first taxable year succeeding the taxable year that includes May 5, 2007.

(c) Return for the first taxable year succeeding the taxable year that includes May 5, 2007, filed on or before August 11, 2008 . If on or before August 11, 2008, the taxpayer filed its federal tax return for the first taxable year succeeding the taxable year that includes May 5, 2007, the taxpayer may make the change in method of accounting under section 6.22 of this APPENDIX either by:

(i) Filing an amended federal tax return (or a qualified amended return) on or before December 31, 2009, for the first tax

able year succeeding the taxable year that includes May 5, 2007, attaching a Form 3115 to the amended federal tax return, and including the statement “Filed Pursuant to Notice 2008–67” at the top of any amended return (or qualified amended return); or

(ii) Filing a Form 3115 with the taxpayer’s timely filed federal tax return for the second taxable year succeeding the taxable year that includes May 5, 2007, if the taxpayer owns the property as of the first day of this taxable year.

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

(4) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.22 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.22 of this APPENDIX is “115.” See section 6.02(4) of this revenue procedure. (6) Contact Information . For further information regarding a change under

January 24, 2011 375 2011–4 I.R.B.

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

(i) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to change its method of accounting under section 6.24 of this APPENDIX if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction with a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable); (ii) any property that is not depreciated under § 168 under the taxpayer’s present and proposed methods of accounting;

(iii) any section 1245 property or depreciable land improvement (but see section 6.25 of this APPENDIX for making this change);

(iv) any leasehold improvement, whether made by the lessor or the lessee (unless the taxpayer leased land and constructed a building on such leased land, and such building (including its structural components) is the leasehold improvement and is the unit of property under the taxpayer’s proposed method of accounting under section 6.24 of this APPENDIX);

(v) any property disposed of by the taxpayer in a transaction to which a nonrecognition section of the Code applies (for example, § 1031, transactions subject to § 168(i)(7));

(vi) any property subject to a general asset account election under § 168(i)(4) and the regulations thereunder;

(vii) any building with multiple condominium or cooperative units (unless each condominium or cooperative unit is the unit of property under the taxpayer’s proposed method of accounting under section 6.24 of this APPENDIX); or (viii) any multiple buildings (including their structural components) that are treated as a single building (single unit of property) under the taxpayer’s present method of accounting or will be treated as a single building (single unit of property) under the taxpayer’s proposed method of accounting.

(2) Manner of making change . A taxpayer making this change must attach to its Form 3115 a statement with the following:

(a) A detailed description of the types of property to which this change applies;

(b) A detailed description of the unit of property under the taxpayer’s present

existing leases is granted only if the taxpayer’s treatment of the property subject to the tenant construction allowances is consistent with the treatment of such property by the counterparty for federal income tax purposes. The following information must be submitted with a Form 3115 submitted under Rev. Proc. 97–27:

(i) If a lessee is filing the Form 3115, the lessee must submit with the Form 3115: (A) a statement that provides the amount of the tenant construction allowance received by the lessee, the amount of such tenant construction allowance expended by the lessee on property, and the name of the lessor that provided the tenant construction allowance; and (B) a representation, signed under penalties of perjury, from such lessor that provides the amount of the tenant construction allowance provided to the lessee and an explanation as to how the lessor is treating the property subject to such tenant construction allowance for federal income tax purposes. If the lessor capitalized the tenant construction allowance (or any portion thereof) provided to the lessee and depreciated the property subject to such tenant construction allowance, the representation must also include the amount that was capitalized by the lessor, the Internal Revenue Code section under which the property is depreciated by the lessor, and the life over which the property is depreciated by the lessor.

(ii) If a lessor is filing the Form 3115, the lessor must submit with the Form 3115: (A) a statement that provides the amount of the tenant construction allowance provided to a lessee and the name of the lessee that received such tenant construction allowance; and (B) a representation, signed under penalties of perjury, from such lessee that provides the amount of the tenant construction allowance received from the lessor, the amount of such tenant construction allowance recognized as gross income by the lessee, the amount of the tenant construction allowance expended by the lessee on property, and an explanation as to how the lessee is treating the property subject to the tenant construction allowance for federal income tax purposes. If the lessee capitalized the tenant construction allowance (or any portion thereof) received from the lessor and depreciated the property subject to such tenant construction allowance, the repre

sentation must also include the amount that was capitalized by the lessee, the Internal Revenue Code section under which the property is depreciated by the lessee, and the life over which the property is depreciated by the lessee.

(4) No audit protection . A taxpayer does not receive audit protection under section 7 of this revenue procedure in connection with this change.

(5) Concurrent automatic change . A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets.

(6) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.23 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(7) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 6.23 of this APPENDIX is “145.” See section 6.02(4) of this revenue procedure. (8) Contact information . For further information regarding a change under this section, contact Ruba Nasrallah at 202–622–4930 (not a toll-free call). .24 Dispositions of structural components of a building (section 168) .

(1) Description of change . (a) Applicability . This change applies to a taxpayer that wants to change to a unit of property that is permissible under applicable legal authority for determining when the taxpayer has disposed of a building (as defined in § 1.48–1(e)(1), except as otherwise provided under any other applicable provision of the Code or regulations relating to depreciation or amortization (for example, § 1400I(f)(3))), and its structural components (as defined in § 1.48–1(e)(2)) for depreciation purposes. This change also will affect the determination of gain or loss from the disposition of the building (including its structural components).

2011–4 I.R.B. 376 January 24, 2011

taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(6) Designated automatic accounting method change number . The designated automatic accounting method change number for a change in method of accounting under section 6.24 of this APPENDIX is “146.” See section 6.02(4) of this revenue procedure.

(7) Contact information . For further information regarding a change under this section, contact Charles Magee at 202–622–4930 (not a toll-free call). .25 Dispositions of tangible depreciable assets (other than a building or its structural components) (section 168) .

(1) Description of change . (a) Applicability . This change applies to a taxpayer that wants to change to a unit of property that is permissible under applicable legal authority for determining when the taxpayer has disposed of a section 1245 property or a depreciable land improvement for depreciation purposes. This change also will affect the determination of gain or loss from the disposition of the section 1245 property or the depreciable land improvement.

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

(i) a taxpayer that is required under § 263A and the regulations thereunder to capitalize the costs with respect to which the taxpayer wants to change its method of accounting under section 6.25 of this APPENDIX if the taxpayer is not capitalizing these costs, unless the taxpayer concurrently changes its method to capitalize these costs in conjunction with a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable); (ii) any property that is not depreciated under § 168 under the taxpayer’s present and proposed methods of accounting;

(iii) any building (including its structural components) (but see section 6.24 of this APPENDIX for making this change);

(iv) any leasehold improvement, whether made by the lessor or the lessee (unless each leasehold improvement is the unit of property under the taxpayer’s proposed method of accounting under section 6.25 of this APPENDIX);

and proposed methods of accounting for determining when the building (including its structural components) is disposed of by the taxpayer for depreciation purposes (when depreciation ends);

(c) A detailed description of how the taxpayer determined the unit of property under its present method of accounting for determining when the building (including its structural components) is disposed of by the taxpayer for depreciation purposes and will determine the unit of property under its proposed method of accounting for determining when the building (including its structural components) is disposed of by the taxpayer for depreciation purposes. If this proposed unit of property is not each building (including its structural components) (except as provided in section 6.24(1)(b)(vii) of this APPENDIX regarding condominium or cooperative units), also provide the legal authority supporting the taxpayer’s proposed unit of property for determining when the building (including its structural components) is disposed of by the taxpayer for depreciation purposes;

(d) A statement as to whether the taxpayer’s proposed unit of property for determining when the building (including its structural components) is disposed of by the taxpayer for depreciation purposes is the same as the taxpayer’s present unit of property for determining when the building (including its structural components) is placed in service by the taxpayer (when depreciation begins). If not, also provide the unit of property for determining when the building (including its structural components) is placed in service by the taxpayer and explain why the taxpayer is using a different unit of property for determining when the building (including its structural components) is placed in service; and

(e) if any item of property is public utility property within the meaning of § 168(i)(10) or former § 167(l)(3)(A), as applicable, a statement providing that the taxpayer agrees to the following additional terms and conditions:

(i) a normalization method of accounting (within the meaning of former § 167(l)(3)(G), former § 168(e)(3)(B), or § 168(i)(9), as applicable) will be used for the public utility property subject to the application;

(ii) as of the beginning of the year of change, the taxpayer will adjust its de

ferred tax reserve account or similar reserve account in the taxpayer’s regulatory books of account by the amount of the deferral of federal income tax liability associated with the § 481(a) adjustment applicable to the public utility property subject to the application; and

(iii) within 30 calendar days of filing the federal income tax return for the year of change, the taxpayer will provide a copy of the completed application to any regulatory body having jurisdiction over the public utility property subject to the application.

(3) No ruling on unit of property . The consent granted under this revenue procedure for this change is not a determination by the Commissioner that the taxpayer is using the appropriate unit of property for determining when the building (including its structural components) is placed in service or disposed of by the taxpayer for depreciation purposes and does not create any presumption that the proposed unit of property is permissible for depreciation purposes. The director will ascertain whether the taxpayer’s determination of its unit of property for depreciation purposes is correct.

(4) Concurrent automatic change. (a) A taxpayer that wants to make both this change and a change to a UNICAP method under section 11.01 or 11.02 of this APPENDIX (as applicable) for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter 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 both this change and a change under section 6.25 of this APPENDIX for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(5) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.24 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the

January 24, 2011 377 2011–4 I.R.B.

for both changes on the appropriate line on that Form 3115.

(b) A taxpayer that wants to make both this change and a change under section 6.24 of this APPENDIX for the same year of change should file a single Form 3115 for both changes, in which case the taxpayer must enter the designated automatic accounting method change numbers for both changes on the appropriate line on that Form 3115.

(5) Ogden copy of Form 3115 required in lieu of national office copy . A taxpayer changing its method of accounting under this section 6.25 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(6) Designated automatic accounting method change number . The designated automatic accounting method change number for a change in method of accounting under section 6.25 of this APPENDIX is “147.” See section 6.02(4) of this revenue procedure.

(7) Contact information . For further information regarding a change under this section, contact Charles Magee at 202–622–4930 (not a toll-free call).