Instructions For Form 1128 (Rev. January 2006) Page 5
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8a Federal court with respect to a
accounting period is not an issue
in 1, equals or exceeds 25 percent,
partner’s or shareholder’s Federal
under consideration by the Federal
then the requested annual accounting
income tax return.
court. The applicant must attach to
period is deemed to be the taxpayer’s
5. The entity is requesting a
the application a separate statement
natural business year.
change to, or retention of, a natural
signed by the applicant certifying that,
b. The taxpayer must determine
business year as described in section
to the best of the applicant’s
whether any annual accounting
4.01(2) of Rev. Proc. 2002-38 if the
knowledge, the applicant’s annual
period other than the requested
entity has changed its annual
accounting period is not an issue
annual accounting period also meets
accounting period at any time within
under consideration by the Federal
the 25-percent test described in a,
the most recent 48-month period
court. The applicant must also
above. If one or more other annual
ending with the last month of the
provide a copy of the application to
accounting periods produce higher
requested tax year. For this purpose,
the government counsel at the same
averages of the three percentages
the following changes are not
time it files the application with the
(rounded to 1/100 of a percent)
considered prior changes in annual
Service Center. The application must
described in 1 than the requested
accounting period: (a) a change to a
contain the name and telephone
annual accounting period, then the
required tax year or ownership tax
number of the government counsel.
requested annual accounting period
year; (b) a change from a 52-53 week
will not qualify as the taxpayer’s
If the answer to question 4 is “No”
tax year to a non-52-53 week tax year
natural business year.
because the applicant (or a partner or
that ends with reference to the same
3. Special rules:
shareholder) is under examination
calendar month, and vice versa; or (c)
a. To apply the 25-percent gross
and has not obtained the appropriate
a change in accounting period by an
receipts test for any particular year,
director’s consent to the change or
S corporation or PSC, in order to
the taxpayer must compute its gross
retention of the applicant’s annual
comply with the common tax year
receipts under the method of
accounting period or the applicant is
requirements of Regulations sections
accounting used to prepare its federal
before an appeals office or Federal
1.1502-75(d)(3)(v) and
income tax returns for such tax year.
court and the applicant’s annual
1.1502-76(a)(1).
b. If the taxpayer has a
accounting period is an issue under
predecessor organization and is
consideration by the appeals office or
If the answer to question 4 is
continuing the same business as its
Federal court, do not complete Part
“Yes,” and any of the following
predecessor, the taxpayer must use
III.
situations apply, the applicable
the gross receipts of its predecessor
If the answer to question 4 is “No”
additional procedures described
for purposes of computing the
solely because of a prior change as
below must be followed.
25-percent gross receipts test.
•
described in item (5) above, go to
The applicant is under examination
c. If the taxpayer (including any
Part III after completing Section B.
and has obtained the consent of the
predecessor organization) does not
appropriate director to the change or
If the answer to question 4 is “Yes”
have a 47-month period of gross
(and the answer to question 5, 6, or 7
retention of the applicant’s annual
receipts (36-month period for the
accounting period. The applicant
is also “Yes”), sign Form 1128 and
requested tax year plus an additional
must attach to the application a
see Part II — Automatic Approval
11-month period for comparing the
statement from the director
Request under Where To File, above.
requested tax year with other
Do not complete Part III. If the answer
consenting to the change or retention.
potential tax years), then it cannot
The applicant must also provide a
to question 4 is “Yes” (and the
establish a natural business year
copy of the application to the director
answer to question 5, 6, or 7 is “No”),
under this revenue procedure.
go to Part III after completing Section
at the same time it files the
d. If the requested tax year is a
application with the Service Center.
B.
52-53-week tax year, the calendar
The application must contain the
Line 6. A partnership, S corporation,
month ending nearest to the last day
name(s) and telephone number(s) of
electing S corporation, or PSC
of the 52-53-week tax year is treated
the examination agent(s).
establishes a ‘‘natural business year’’
as the last month of the requested tax
•
The applicant is before an appeals
under Rev. Proc. 2002-38 by
year for purposes of computing the
(area) office and the applicant’s
satisfying the following ‘‘25-percent
25-percent gross receipts test.
annual accounting period is not an
gross receipts test:’’
issue under consideration by the
If the applicant is requesting to
1. Prior three years gross receipts.
appeals (area) office. The applicant
change to a natural business year
a. Gross receipts from sales and
must attach to the application a
that satisfies the 25-percent gross
services for the most recent 12-month
separate statement signed by the
receipts test described in section 5.05
period that ends with the last month
applicant certifying that, to the best of
of Rev. Proc. 2002-38, the applicant
of the requested annual accounting
the applicant’s knowledge, the
must supply its gross receipts for the
period are totaled and then divided
applicant’s annual accounting period
most recent 47 months (or for any
into the amount of gross receipts from
is not an issue under consideration by
predecessor).
sales and services for the last 2
the appeals (area) office. The
months of this 12-month period.
applicant must also provide a copy of
Line 7. For an S corporation, an
b. The same computation as in a,
the application to the appeals officer
‘‘ownership tax year’’ is the tax year
above is made for the two preceding
at the same time it files the
(if any) that, as of the first day of the
12-month periods ending with the last
application with the Service Center.
first effective year, constitutes the tax
month of the requested annual
The application must contain the
year of one or more shareholders
accounting period.
name and telephone number of the
(including any shareholder that
2. Natural business year:
appeals officer.
concurrently changes to such tax
•
The applicant is before a Federal
a. Except as provided in b, below,
year) holding more than 50 percent of
court and the applicant’s annual
if each of the three results described
the corporation’s issued and
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