SECTION 3. TRADE OR BUSINESS

EXPENSES (§ 162)

.01 Advances made by a lawyer on behalf of clients .

(1) Description of change . This change applies to a lawyer who advances money to pay for costs of litigation or for other expenses on behalf of clients, and who wants to change the method of accounting for such advances from treating them as deductible business expenses to treating them as loans. This change applies to cases handled either on a non-contingent or a contingent fee basis. See Pelton & Gunther, P.C. v. Commissioner, T.C. Memo. 1999–339 (non-contingent fee); Canelo v. Commissioner, 53 T.C. 217 (1969), aff’d per curiam, 447 F.2d 484 (9 ^th Cir. 1971) (contingent fee).

(2) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 3.01 is “2.” (3) Contact information . For further information regarding a change under this section, contact Daniel Cassano at (202) 317-7011 prior to November 1, 2015, or Martin Osborne after October 31, 2015, at (202) 317-7011 (not a toll-free number).

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

(2) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 3.02 is “3.” (3) Contact information . For further information regarding a change under this section, contact Daniel Cassano at (202) 317-7011 prior to November 1, 2015, or

Martin Osborne after October 31, 2015, at (202) 317-7011 (not a toll-free number).

.03 Restaurant or tavern smallwares packages .

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

(2) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 3.03 is “4.” (3) Contact information . For further information regarding a change under this section, contact Daniel Cassano at (202) 317-7011 prior to November 1, 2015, or Martin Osborne after October 31, 2015, at (202) 317-7011 (not a toll-free number).

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

(2) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 3.04 is “86.” (3) Contact information . For further information regarding a change under this section, contact Daniel Cassano at (202) 317-7011 prior to November 1, 2015, or Martin Osborne after October 31, 2015, at (202) 317-7011 (not a toll-free number).

05 Materials and supplies . See section 10.11 of this revenue procedure. .06 Repair and maintenance costs . See section 10.11 of this revenue procedure.

.07 Wireline network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011–27 .

(1) Description of change . This change applies to a wireline telecommunications carrier that is within the scope of Rev. Proc. 2011–27, 2011–18 I.R.B. 740, and

wants to change its treatment of wireline network asset expenditures to use either (a) the wireline network asset maintenance allowance method of accounting, or (b) all or some of the units of property described in Rev. Proc. 2011–27.

(2) Section 481(a) adjustment . In general, a change to the wireline network asset maintenance allowance method of accounting or to use all or some of the units of property specified in Rev. Proc. 2011–27 requires an adjustment under § 481(a). The § 481(a) adjustment shall not include any amount attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)–11(d)(2).

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 3.07 is “158.” (4) Contact information . For further information regarding a change under this section, contact Lewis Saideman at (202) 317-5100 (not a toll-free number). .08 Wireless network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011–28 .

(1) Description of change . This change applies to a wireless telecommunications carrier that is within the scope of Rev. Proc. 2011–28, 2011–18 I.R.B. 743, and wants to change its treatment of wireless network asset expenditures to use either (a) the wireless network asset maintenance allowance method of accounting, or (b) all or some of the units of property described in Rev. Proc. 2011–28.

(2) Section 481(a) adjustment . In general, a change to the wireless network asset maintenance allowance method of accounting or to use all or some of the units of property specified in Rev. Proc. 2011–28 requires an adjustment under § 481(a). The § 481(a) adjustment does not include any amount attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)–11(d)(2).

(3) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 3.08 is “159.” (4) Contact information . For further information regarding a change under this

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section, contact Lewis Saideman at (202) 317-5100 (not a toll-free number). .09 Method of accounting under Rev. Proc. 2011–43 for taxpayers in the busi- ness of transporting, delivering, or selling electricity .

(1) Description of change . This change applies to a taxpayer that is within the scope of Rev. Proc. 2011–43, 2011–37 I.R.B. 326, and wants to change its treatment of transmission and distribution property expenditures to use the method of accounting described in Rev. Proc. 2011–43. (2) Certain eligibility rules temporarily inapplicable . The eligibility rules in sections 5.01(1)(d) and (f) of Rev. Proc. 2015–13, 2015–5 I.R.B. 419, do not apply to an electric transmission or distribution company that changes to the method of accounting provided in Rev. Proc. 2011– 43, for its first, second, third, or fourth taxable year ending after December 30, 2010. (3) Section 481(a) adjustment . A taxpayer must take the entire net § 481(a) adjustment into account (whether positive or negative) in computing taxable income for the year of change. The § 481(a) adjustment does not include any amount attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)–11 (d)(2) for any taxable year in which the election was made. For guidance regarding permissible § 481(a) calculation methodologies, see section 7.02 and Appendix A of Rev. Proc. 2011–43.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 3.09 is “160.” (5) Contact information . For further information regarding a change under this section, contact Lewis Saideman at (202) 317-5100 (not a toll-free number). .10 Reserved . .11 Reserved . .12 Reserved . .13 Reserved . .14 Reserved . .15 Reserved . .16 Reserved . .17 Reserved . .18 Reserved . .19 Reserved .

.20 Method of accounting under Rev. Proc. 2013–24 for taxpayers in the busi- ness of generating steam or electric power .

(1) Description of change . This change applies to a taxpayer that is within the scope of Rev. Proc. 2013–24, 2013–22 I.R.B. 1142, and wants to change its treatment of generation property expenditures to use all or some of the unit of property definitions and the corresponding major component definitions described in Rev. Proc. 2013–24.

(2) Certain eligibility rules temporarily inapplicable . The eligibility rules in sections 5.01(1)(d) and (f) of Rev. Proc. 2015–13, 2015–5 I.R.B. 419, do not apply to an eligible taxpayer that changes to the method of accounting provided in Rev. Proc. 2013–24 for its first, second, or third taxable year ending after December 30, 2012. (3) Section 481(a) adjustment . (a) A taxpayer must take the entire net § 481(a) adjustment into account (whether positive or negative) in computing taxable income for the year of change. For guidance regarding the use of extrapolation in computing a § 481(a) adjustment, see sections 6.02 and Appendix B of Rev. Proc. 2013–24. (b) A taxpayer changing to this method of accounting must not include in the § 481(a) adjustment any amount attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)–11(d)(2) for any taxable year in which the repair allowance election was made.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 3.20 is “182.” (5) Contact information . For further information regarding a change under this section, contact Lewis Saideman at (202) 317-5100 (not a toll free number). .21 Cable network asset capitalization methods of accounting under Rev. Proc. 2015–12 . (1) Description of change . This change applies to a cable system operator that is within the scope of Rev. Proc. 2015–12, 2015–2 I.R.B. 266, and wants to make one or more of the of the following changes in method of accounting:

(a) Change its treatment of cable network asset expenditures to the cable network asset maintenance allowance method of accounting provided in section 5 of Rev. Proc. 2015–12; (b) Change to use any of the unit of property definitions provided in section 6 of Rev. Proc. 2015–12;

(c) Change to use the specific identification method for installations and customer drop costs described in section 7.01(1) of Rev. Proc. 2015–12; (d) Change to use the safe harbor allocation method for installations and customer drop costs described in section 7.01(2) of Rev. Proc. 2015–12; or (e) Change to deduct the labor costs associated with installing customer premises equipment under section 7.02 of Rev. Proc. 2015–12.

(2) Certain eligibility rules temporarily inapplicable . The eligibility rules in section 5.01(1)(d) and (f) of Rev. Proc. 2015– 13, 2015–5 I.R.B. 419, do not apply to a cable system operator that changes to a method of accounting provided in section 5, section 6, or section 7 of Rev. Proc. 2015–12 for its first or second taxable year ending after December 31, 2013.

(3) Concurrent automatic change . A taxpayer that wants to make both one or more changes in method of accounting pursuant to this section 3.21 and a change to a UNICAP method under section 11 of this revenue procedure for the same year of change should file a single Form 3115 that includes all of these changes and must enter the designated automatic accounting method change numbers for all of these changes on the appropriate line on the Form 3115. See section 6.03(1)(b) of Rev. Proc. 2015–13 for information on making concurrent changes.

(4) Section 481(a) adjustment . (a) In general, a change to one or more of the of the changes in method of accounting described in section 3.21(1) of this revenue procedure requires an adjustment under § 481(a). The § 481(a) adjustment shall not include any amount attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)–11(d)(2).

(b) Itemized listing on Form 3115 . The taxpayer must include on Form 3115, Part IV, line 25, the total § 481(a) adjustment for all changes in methods of accounting

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being made. If the taxpayer is making more than one change in method of accounting under Rev. Proc. 2015–12, the taxpayer must include on an attachment to Form 3115:

(i) the information required by Part IV, line 25 for each change in method of accounting (including the amount of the § 481(a) adjustment for each change in method of accounting, which includes the portion of the § 481(a) adjustment attributable to UNICAP);

(ii) the information required by Part II, line 12 of Form 3115 that is associated with each change; and

(iii) the citation to the paragraph of Rev. Proc. 2015–12 that provides for each proposed method of accounting.

(5) Designated automatic accounting method change number . The designated automatic accounting method change number for a change to a method of accounting provided in section 5 or 6 of Rev. Proc. 2015–12 is “208.” The designated automatic accounting method change number for a change to a method of accounting provided in section 7 of Rev. Proc. 2015–12 is “209.”

(6) Contact information . For further information regarding a change under this section, contact Merrill Feldstein at (202) 317-5100.