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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
request procedures if you comply with
the procedures explained following
item 5 below. See section 7.03 of
Rev. Proc. 2006-46 for more
information.
5. The entity has changed its
annual accounting period at any time
within the most recent 48-month
period ending with the last month of
the requested tax year. For this
purpose, the following changes are
not considered prior changes in
annual accounting period: (a) a
change to a required tax year or
ownership tax year; (b) a change from
a 52-53-week tax year to a
non-52-53-week tax year that ends
with reference to the same calendar
month, and vice versa; or (c) a
change in accounting period by an S
corporation or PSC, in order to comply
with the common tax year
requirements of Regulations sections
1.1502-75(d)(3)(v) and 1.1502-76(a).
If the answer to the question on
Part II, Section B, line 4, is “Yes,” and
any of the following situations apply,
the applicable additional procedures
described below must be followed.
The applicant is under examination
and has obtained the consent of the
appropriate director to the change or
retention of the applicant's annual
accounting period. The applicant must
attach to the application a statement
from the director consenting to the
change or retention. The applicant
must also provide a copy of the
application to the director at the same
time it files the application with the
Service Center. The application must
contain the name(s) and telephone
number(s) of the examination
agent(s).
The applicant is before an appeals
office and the applicant's annual
accounting period is not an issue
under consideration by the appeals
office. The applicant must attach to
the application a separate statement
signed by the applicant certifying that,
to the best of the applicant's
knowledge, the applicant's annual
accounting period is not an issue
under consideration by the appeals
office. The applicant must also
provide a copy of the application to
the appeals officer at the same time it
files the application with the Service
Center. The application must contain
the name and telephone number of
the appeals officer.
The applicant is before a federal
court and the applicant's annual
accounting period is not an issue
under consideration by the federal
court. The applicant must attach to the
application a separate statement
signed by the applicant certifying that,
to the best of the applicant's
knowledge, the applicant's annual
accounting period is not an issue
under consideration by the federal
court. The applicant must also provide
a copy of the application to the
government counsel at the same time
it files the application with the Service
Center. The application must contain
the name and telephone number of
the government counsel.
If the answer to the question on
Part II, Section B, line 4, is “No”
because the applicant (or a partner or
shareholder) is under examination
and has not obtained the appropriate
director's consent to the change or
retention of the applicant's annual
accounting period or the applicant is
before an appeals office or federal
court and the applicant's annual
accounting period is an issue under
consideration by the appeals office or
federal court, do not complete Part III.
If the answer to line 4 is “No” solely
because of a prior change as
described in item (5) above, go to Part
III after completing Section B.
If the answer to line 4 is “Yes” (and
the answer to line 5, 6, or 7 is also
“Yes”), sign Form 1128 and see Part
II—Automatic Approval Request
under Where To File, earlier. Do not
complete Part III. If the answer to
line 4 is “Yes” (and the answer to
line 5, 6, or 7 is “No”), go to Part III.
Line 6. A partnership, S corporation,
electing S corporation, or PSC
establishes a "natural business year"
under Rev. Proc. 2006-46 by
satisfying the following "25-percent
gross receipts test." The applicant
must supply its gross receipts for the
most recent 47 months (or for any
predecessor) to compute the
25-percent gross receipts test.
1. Prior 3 years gross receipts:
a. Gross receipts from sales and
services for the most recent 12-month
period that ends with the last month of
the requested annual accounting
period are totaled and then divided
into the amount of gross receipts from
sales and services for the last 2
months of this 12-month period.
b.
The same computation as in a,
above, is made for the two preceding
12-month periods ending with the last
month of the requested annual
accounting period.
2. Natural business year:
a. Except as provided in b, below,
if each of the three results described
in 1 above equals or exceeds 25
percent, then the requested annual
accounting period is deemed to be the
taxpayer's natural business year.
b. The taxpayer must determine
whether any annual accounting period
other than the requested annual
accounting period also meets the
25-percent test described in a, above.
If one or more other annual
accounting periods produce higher
averages of the three percentages
(rounded to 1/100 of a percent)
described in 1 above than the
requested annual accounting period,
then the requested annual accounting
period will not qualify as the
taxpayer's natural business year.
3. Special rules:
a. To apply the 25-percent gross
receipts test for any particular year,
the taxpayer must compute its gross
receipts under the method of
accounting used to prepare its federal
income tax returns for such tax year.
b. If the taxpayer has a
predecessor organization and is
continuing the same business as its
predecessor, the taxpayer must use
the gross receipts of its predecessor
for purposes of computing the
25-percent gross receipts test.
c. If the taxpayer (including any
predecessor organization) does not
have a 47-month period of gross
receipts (36-month period for the
requested tax year plus an additional
11-month period for comparing the
requested tax year with other potential
tax years), then it cannot establish a
natural business year under this
revenue procedure.
d. If the requested tax year is a
52-53-week tax year, the calendar
month ending nearest to the last day
of the 52-53-week tax year is treated
as the last month of the requested tax
year for purposes of computing the
25-percent gross receipts test.
Line 7. For an S corporation, an
"ownership tax year" is the tax year
other than a calendar year (if any)
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