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Step-allocation method — Regulations section

list conflicts with published guidance, the published guidance

1.263A-1(g)(4)(iii)(B).

applies.

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Simplified service cost method:

Each item in the list below:

Using the labor-based allocation ratio — Regulations section

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Designates an automatic accounting method change number

1.263A-1(h)(4).

for each change for entry on line 1a of Form 3115.

Using the production cost allocation ratio — Regulations

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Briefly describes the accounting method change and its

section 1.263A-1(h)(5).

primary Code section(s).

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Any other reasonable allocation method — Regulations

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Indicates in some cases which schedules of Form 3115 to

section 1.263A-1(f)(4).

complete.

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Provides a reference to the basic published guidance (for

3. Capitalizing Additional Section 263A Costs

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example, revenue procedure) that provides for the automatic

Simplified production method:

change, which filers should review prior to completing Part I,

Without historic absorption ratio election — Regulations

Information For Automatic Change Request, on page 1 of Form

section 1.263A-2(b)(3).

3115.

With historic absorption ratio election — Regulations section

1. Commodity Credit Corporation loans (section

1.263A-2(b)(4).

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77) — for loans received from the Commodity Credit

Simplified resale method:

Corporation, from including the loan amount in gross income

Without historic absorption ratio election — Regulations

for the tax year in which the loan is received to treating the loan

section 1.263A-3(d)(3).

amount as a loan. See section 2.01 in the Appendix of Rev.

With historic absorption ratio election — Regulations section

Proc. 2008-52.

1.263A-3(d)(4).

2. Lawyers handling cases on a contingent fee basis

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U.S. ratio method — Notice 88-104, 1988-2 C.B. 443.

(section 162) — from treating advances of money to their

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Any other reasonable allocation method — Regulations

clients for litigation costs as deductible business expenses to

section 1.263A-1(f)(4) (including the methods listed on page 8

treating those advances as loans. See section 3.01 in the

under Allocating Direct and Indirect Costs).

Appendix of Rev. Proc. 2008-52.

3. ISO 9000 costs (section 162) — to treating the costs as

Schedule E—Change in Depreciation or

deductible, except to the extent they result in the creation or

Amortization

acquisition of an asset having a useful life substantially beyond

the tax year. See section 3.02 in the Appendix of Rev. Proc.

All applicants requesting to change their method of depreciation

2008-52.

or amortization must complete Schedule E of Form 3115.

4. Restaurant smallwares costs (section 162) — to the

Applicants changing their method of accounting for depreciation

smallwares method described in Rev. Proc. 2002-12, 2002-1

or amortization under the automatic change request procedures

C.B. 374 (that is, as materials and supplies that are not

should see the depreciation changes in the List of Automatic

incidental under Regulations section 1.162-3). See section 3.03

Accounting Method Changes below.

in the Appendix of Rev. Proc. 2008-52.

Do not file Form 3115:

5. Bad debts (section 166) — for an applicant other than a

bank, from accounting for bad debts using a reserve or other

1. To make an election under sections 167, 168, 179, 1400I,

improper method to a specific charge-off method that complies

1400L(b), 1400L(c), or 1400N(d), or former section 168;

with section 166. See section 4.01 in the Appendix of Rev.

2. To revoke an election made under one of those sections;

Proc. 2008-52.

3. To make or revoke an election under section 13261(g)(2)

6. Bad debt conformity for banks (section 166) — for

or (3) of the Revenue Reconciliation Act of 1993 (relating to

banks other than new banks, to the method that conforms to

section 197 intangibles);

Regulations section 1.166-2(d)(3) for the first time the bank

4. To change the placed-in-service date;

makes this change, or to involuntarily revoke this method. This

5. To change the salvage value (except for a change in

change does not fall under the procedures of Rev. Proc.

salvage value to zero when the salvage value is expressly

2008-52. Instead, see Regulations section 1.166-2(d)(3).

treated as zero by the Code, the regulations, or other published

7. Depreciation or amortization (impermissible)

guidance); or

(sections 56, 167, 168, 197, 1400I, 1400L, 1400N, and former

6. To change a useful life under section 167 (except for a

section 168) — from an impermissible method to a permissible

change to or from a useful life, recovery period, or amortization

method for changes allowed under Regulations section

period that is specifically assigned by the Code, the regulations,

1.446-1(e)(2)(ii)(d), and for depreciable property owned at the

or other published guidance).

beginning of the year of change. Complete Schedule E of Form

3115. An applicant changing its method of accounting for

depreciation because of a change described in designated

List of Automatic Accounting Method

automatic accounting method change number 10 (sale or lease

transactions) must file Form 3115 according to the designated

Changes

automatic accounting method change number 10. See section

Listed below are automatic accounting method changes

6.01 in the Appendix of Rev. Proc. 2008-52.

providing for the filing of Form 3115. This list includes

8. Depreciation (permissible) (sections 56 and

regulatory automatic changes, changes provided for in the

167) — from a permissible method to another permissible

Appendix of Rev. Proc. 2008-52, as modified by Rev. Proc.

method listed in section 6.02 in the Appendix of Rev. Proc.

2009-39, and automatic changes provided for in other

2008-52. Complete Schedule E of Form 3115. See section 6.02

guidance. These automatic changes may be modified or

in the Appendix of Rev. Proc. 2008-52.

supplemented with additional automatic changes by

9. Obsolete.

subsequently published guidance.

10. Sale, lease or financing transactions (sections 61,

162, 167, 168, and 1012) — from treating property as sold,

The list provides a brief description of the automatic changes

leased or, financed to another permissible method described in

in method of accounting made using Form 3115. A

section 6.03 in the Appendix of Rev. Proc. 2008-52. See

filer/applicant may not rely on the list or the descriptions of

section 6.03 in the Appendix of Rev. Proc. 2008-52.

accounting method changes in the list as authority for making

an accounting method change. A filer/applicant that is within the

11. Modern golf course greens (sections 167, 168, and

scope of, and complies with, all the applicable provisions of the

former section 168) — either to capitalization of land

published guidance that authorizes each listed change may rely

preparation costs undertaken in the construction of modern golf

on the applicable published guidance as authority for its

course greens that are closely associated with depreciable

automatic accounting method change. If any information in the

assets or to the addition to basis of land for earth moving costs

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Instructions For Form 3115 - Application For Change In Accounting Method - Internal Revenue Service - 2009 Page 9

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