SECTION 24. MARK-TO-MARKET

ACCOUNTING METHODS (Including § 475 ).

01 Commodities dealers, securities traders, and commodities traders elect- ing to use the mark-to-market method of accounting under § 475(e) or (f)

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(1) Description of change . This change applies to certain taxpayers that have elected to use the mark-to-market method of accounting under § 475(e) or (f) . Under § 475(e) and (f) and Rev . Proc . 99-17, 1999-1 C .B . 503, if a taxpayer makes a timely election under § 475(e) or (f), then beginning with the first taxable year for which the election is effective (election year), mark to market is the only permissible method of accounting for securities or commodities, as defined in § 475(c)(2), subject to the election . Thus, if the electing taxpayer’s method of accounting for its taxable year immediately preceding the election year for securities or commodities subject to the election is inconsistent with § 475, the taxpayer is required to change its method of accounting to comply with the election by filing a Form 3115 under the procedures in section 24 .01(5) of this revenue procedure . A taxpayer that makes a § 475(e) or (f) election but fails to change its method of accounting under the procedures in section 24 .01(5) of this revenue procedure to comply with that election is using an impermissible method . See section 4 of Rev . Proc . 99-17 .

(2) Applicability . This change applies to a taxpayer if all of the following conditions are satisfied:

(a) the taxpayer is a commodities dealer, securities trader, or commodities trader that has made a valid election under § 475(e) or (f) ( see section 5 .03(1) of Rev . Proc . 99-17) and that is required to change its method of accounting to comply with the election;

(b) the method of accounting to which the taxpayer changes is in accordance with its election under § 475(e) or (f);

(c) the year of change is the election year; and

(d) the taxpayer has not revoked a previous § 475(e) or (f) election, whichever is applicable, within the five taxable years ending with the election year . (If this condition is not met, the taxpayer must request the change to resume using the mark-to-market method under the procedures in section 24 .01(7) of this revenue procedure .)

(3) Certain eligibility rule inapplica- ble . The eligibility rule in section 5 .01(1) (d) of Rev . Proc . 2015-13, 2015-5 I .R .B . 419, does not apply to this change .

(4) Election under Rev. Proc. 99-17 . In accordance with section 5 .03(1) of Rev . Proc . 99-17, to make a § 475(e) or (f) election, a taxpayer must file a statement satisfying the requirements in section 5 .04 of Rev . Proc . 99-17 (Election Statement). The taxpayer must file the Election Statement not later than the due date (without regard to any extension) of the original federal income tax return for the taxable year immediately preceding the election year and must attach the Election Statement either to that return or, if applicable, to a request for an extension of time to file that return. For example, if a calendar year individual taxpayer wants to make a § 475(e) or (f) election for 2024 (the election year), the taxpayer must file the Election Statement on or before April 15, 2024, with the taxpayer’s timely filed (without regard to any extension) federal income tax return for 2023 or the taxpayer’s timely filed request for an extension of time to file the 2023 federal income tax return .

(5) Form 3115 filing requirements . In addition to filing the Election Statement described in section 24 .01(4) of this revenue procedure, unless the election year is the first taxable year in which the taxpayer owns securities or commodities, whichever is applicable, a Form 3115 is required to be filed with the federal income tax return for the year of change (the election year) in accordance with the procedures in section 6 .03(1) of Rev . Proc . 2015-13 . On the Form 3115, a taxpayer should indicate that the taxpayer has filed the Election Statement in compliance with section 5 .03(1) of Rev . Proc . 99-17 . (6) Limited § 301.9100 relief . Section 301 .9100-3 relief for failure to comply with the requirements of this section 24 .01 will be granted only in unusual and compelling circumstances .

(7) Section 475(e) or (f) election made within five taxable years of revoking a pre- vious election . If a taxpayer has revoked a previous § 475(e) election within the five taxable years ending with the election year for a new § 475(e) election, then the taxpayer may not use the automatic change procedures in Rev . Proc . 2015-13 and this section 24 .01 to resume using the markto-market method of accounting pursuant to the new § 475(e) election . Similarly, if a taxpayer has revoked a previous § 475(f)

election within the five taxable years ending with the election year for a new § 475(f) election, then the taxpayer may not use the automatic change procedures in Rev . Proc . 2015-13 and this section 24 .01 to resume using the mark-to-market method of accounting pursuant to the new § 475(f) election . To resume using the mark-to-market method of accounting described in § 475 during this 5-year period, a taxpayer must: (i) timely file, by the due date described in section 5 .03 of Rev . Proc . 99-17, an Election Statement that satisfies the requirements of section 5 .04 of Rev . Proc . 99-17 and (ii) request a change in method of accounting using the non-automatic change procedures in Rev . Proc . 2015-13 .

(8) Revocation within five taxable years of making a § 475(e) or (f) elec- tion requires a non-automatic change . If a taxpayer wants to revoke a § 475(e) or (f) election, whichever is applicable, within the five taxable years ending with the year of change for the election (the election year), the taxpayer must follow the non-automatic change procedures in section 24 .02(9) of this revenue procedure to make the change .

(9) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under this section 24 .01 is “64 .” (10) Contact information . For further information regarding a change under this section, contact Grace Cho at (202) 3176945 (not a toll-free number) . .02 Taxpayers requesting to change their method of accounting from the mark- to-market method of accounting described in § 475 to a realization method .

(1) Description of change . This change applies to any taxpayer requesting permission to change its method of accounting for securities or commodities as defined in § 475 from the mark-to-market method of accounting described in § 475 to a realization method of accounting . For example, this section 24 .02 applies when a taxpayer is required to change its method of accounting to a realization method after revoking an election under § 475(e), (f) (1), or (f)(2) . This change is not limited to a change required by § 475 (for example, this section 24 .02 applies to a change from a mark-to-market method of accounting

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for notional principal contracts providing for nonperiodic payments even if the taxpayer is not subject to § 475) and, in such a case, references to § 475 in this section 24. 02 are interpreted accordingly. For purposes of this section 24. 02, a change to a realization method of accounting includes a change in which the taxpayer also is required to use a mark-to-market method of accounting under a specific Code section to account for all or some of the taxpayer’s securities or commodities (for example, § 1256 for commodities).

(2) Exclusive procedure . The procedure set forth in this section 24. 02 is the exclusive procedure for changing a taxpayer’s method of accounting from the mark-to-market method described in § 475 to a realization method. Thus, filing the Notification Statement described in section 24. 02(7) of this revenue procedure is the exclusive manner of revoking a § 475(e), (f)(1), or (f)(2) election. Moreover, any taxpayer requesting permission to change to a realization method must follow the procedures described in this section 24. 02 (including the requirement for a timely-filed Notification Statement) and other applicable provisions of Rev. Proc. 2015-13, 2015-5 I. R. B. 419, to request consent to change its method of accounting for securities described in § 475(c)(2) (Section 475 Securities), commodities described in § 475(e)(2) (Section 475 Commodities), or both. (3) Applicability. This change applies to a taxpayer if all of the following conditions in paragraphs (a) through (d) below are satisfied:

(a) the taxpayer is using, properly or improperly, the mark-to-market method of accounting described in § 475;

(b) the taxpayer is requesting permission to change to a realization method of accounting and report gains or losses from the disposition of Section 475 Securities, Section 475 Commodities, or both, under § 1001;

(c) the taxpayer meets the requirements of this section 24. 02, including the requirement that it timely file the Notification Statement described in section 24. 02(7) of this revenue procedure; and (d) the taxpayer has not changed to a mark-to-market method for Section 475 Securities, Section 475 Commodities, or both, whichever are applicable, within the

five taxable years ending with the year of change. (If this condition is not met, the taxpayer must request the change from a mark-to-market method to a realization method under the procedures in section 24. 02(9) of this revenue procedure). (4) Inapplicability . This change does not apply to a dealer in securities, as defined in § 475(c)(1). A dealer in securities must request a change from a mark-to-market method to a realization method under the non-automatic change procedures in Rev. Proc. 2015-13 and file a Notification Statement that satisfies all applicable requirements of section 24. 02(7) of this revenue procedure, including the timely filing requirements. This change will be made on a cut-off basis in the same manner as described in section 24. 02(6) of this revenue procedure.

(5) Certain eligibility rule inapplica- ble . The eligibility rule in section 5. 01(1) (d) of Rev. Proc. 2015-13 does not apply to this change.

(6) Manner of making change . This change is made using a cut-off basis and applies only to Section 475 Securities, Section 475 Commodities, or both, that are accounted for using the mark-to-market method of accounting described in § 475 and for which a change in method is requested under this section 24. 02. Accordingly, a § 481(a) adjustment is neither permitted nor required.

Under the cut-off basis, a taxpayer must make a final mark of all Section 475 Securities, Section 475 Commodities, or both, that are being marked to market and that are the subject of the accounting method change being requested, on the last business day of the year preceding the year of change. As a result of the final mark, gain or loss attributable to those securities and commodities is also recognized on the last business day of the year preceding the year of change. In the case of any Section 475 Security or Section 475 Commodity that a taxpayer holds on the first day of the year of change, the taxpayer must make proper adjustment in the amount of any subsequently realized gain or loss to take into account adjustments for the gain or loss recognized prior to the first day of the year of change pursuant to the use of the markto-market method of accounting described in § 475 in order to prevent amounts from being duplicated or omitted. Any change

in value on or after the first day of the year of change will be taken into account using a realization method of accounting unless section 24. 02(10) of this revenue procedure permits the taxpayer to resume a mark-to-market method and the taxpayer resumes a mark-to-market method.

(7) Notification Statement required . In addition to filing the Form 3115 required under section 6. 03(1) of Rev. Proc. 201513, to change to a realization method of accounting under this section 24. 02, a taxpayer must also file a Notification Statement that satisfies the requirements in section 24. 02(7) of this revenue procedure. The Notification Statement must be filed not later than the due date (without regard to any extension) of the original federal income tax return for the taxable year immediately preceding the year of change and must be attached either to that return or, if applicable, to a request for an extension of time to file that return. For example, a calendar year individual taxpayer who wishes to revoke a § 475(e) or (f) election for the 2024 taxable year must file a Notification Statement that satisfies the requirements of section 24. 02(7) on or before April 15, 2024. The Notification Statement must be attached to the taxpayer’s original federal income tax return for the 2023 taxable year or to a request for an extension of time to file that return.

(a) Notification Statement contents . The Notification Statement must contain (1) the name of the taxpayer that will change its method of accounting (that is, the applicant), and, if applicable, the filer (for example, its parent corporation); (2) a statement that the taxpayer is requesting to change its method of accounting from the mark-to-market method of accounting described in § 475 to a realization method; (3) the year of change (both the beginning and ending dates); and (4) the types of instruments subject to the method change, that is, Section 475 Securities, Section 475 Commodities, or both. If a taxpayer has made an election under § 475(e), (f)(1), or (f)(2), the taxpayer must also include a statement revoking the taxpayer’s section 475 election or elections for the Section 475 Securities, Section 475 Commodities, or both, for which a change in accounting method is sought.

(b) Effect of filing Notification State- ment . Once the taxpayer files a Notification

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Statement for the year of change, a realization method of accounting is the only permissible method of accounting for Section 475 Securities, Section 475 Commodities, or both, described in the Notification Statement for the entire year of change and all subsequent years (unless section 24. 02(10) of this revenue procedure applies). A taxpayer that files the Notification Statement described in this section 24. 02 but fails to change its method of accounting using the procedures described in Rev. Proc. 201513 and this section 24. 02 is using an impermissible method.

(c) Limited § 301.9100 relief . Section 301. 9100 relief for failure to comply with the requirements of this section 24. 02(7) will be granted only in unusual and compelling circumstances.

(8) Additional requirements (a) Form 3115 filing requirements . In addition to filing the Notification Statement described in section 24. 02(7) of this revenue procedure, a Form 3115 is required to be filed with the federal income tax return for the year of change in accordance with the procedures described in section 6. 03(1) of Rev. Proc. 2015-13.

(b) Copy of Notification Statement . A taxpayer must attach a copy of the Notification Statement required in section 24. 02(7) of this revenue procedure to its Form 3115 filed under this section 24.02.

(c) No audit protection for valuation . A taxpayer does not receive audit protection under section 8. 01 of Rev. Proc. 2015-13 for the method of valuation used by the taxpayer to determine the fair market value of the taxpayer’s Section 475 Securities, Section 475 Commodities, or both, for a taxable year prior to the year of change, or for a failure to comply with the requirements in Rev. Proc. 99-17 to properly elect the mark-to-market method. See section 8. 02(2) of Rev. Proc. 2015-13.

(9) Change from a mark-to-market method to a realization method within five taxable years of changing to the mark-to- market method requires a non-automatic change . If a taxpayer wants to change from a mark-to-market method to a realization method for Section 475 Securities, Section 475 Commodities, or both, within the five taxable years ending with the year of change in which the taxpayer changed to the mark-to-market method for the same item, the automatic change procedures of