SECTION 4. SAFE HARBOR

ELECTION

.01 The Service will not challenge a taxpayer’s allocation of a success-based fee between activities that facilitate a transaction described in § 1.263(a)–5(e)(3) and activities that do not facilitate the transaction if the taxpayer—

(1) treats 70 percent of the amount of the success-based fee as an amount that does not facilitate the transaction;

(2) capitalizes the remaining 30 percent as an amount that does facilitate the transaction; and

(3) attaches a statement to its original federal income tax return for the taxable year the success-based fee is paid or incurred, stating that the taxpayer is electing

the safe harbor, identifying the transaction, and stating the success-based fee amounts that are deducted and capitalized.

.02 An election under this revenue procedure applies only to the transaction for which the election is made and, once made, is irrevocable. The election applies with respect to all success-based fees paid or incurred by the taxpayer in the transaction for which the election is made.

.03 An election under this revenue procedure for any transaction does not constitute a change in method of accounting for success-based fees generally. Accordingly, a § 481(a) adjustment is neither permitted nor required.

May 2, 2011 747 2011–18 I.R.B.