Instructions For Form 1128 - Application To Adopt, Change, Or Retain A Tax Year (Page 5 of 9) in pdf

established a business purpose and

changing to its required tax year and

2006-45. This related party change is

obtained the approval of the IRS to

is not described in items (1) through

required notwithstanding the testing

change its accounting period. See

(11), above.

date provisions in section 706(b)(4)

Rev. Proc. 2006-45 for more

(A)(ii), section 898(c)(3)(B),

Note. If the corporation is not allowed

information.

Temporary Regulations section

to use the automatic approval rules

1.921-1T(b)(6), and the special

Line 1. A corporation is not allowed

because of items (1), (2), or (3), listed

provision in section 706(b)(4)(B).

to use the automatic approval rules

above, it can nevertheless

under section 4 of Rev. Proc. 2006-45

Section B—Partnerships, S

automatically change to a natural

if it:

Corporations, Personal Service

business year that meets the

1. Has changed its annual

Corporations, and Trusts

25-percent gross receipts test

accounting period at any time within

described in section 5.04 of Rev.

Rev. Proc. 2006-46 provides

the most recent 48-month period

Proc. 2006-45.

exclusive procedures for a

ending with the last month of the

If the answer to the question on

partnership, S corporation, PSC, or

requested tax year. For exceptions,

Part II, Section A, line 1, is “Yes,” sign

trust within its scope to adopt,

see section 4.02(1) of Rev. Proc.

Form 1128 and see

change, or retain its annual

2006-45.

Part II—Automatic Approval Request

accounting period under section 442

2. Has an interest in a

earlier under

Where To

File. Do not

and Regulations section 1.442-1(b).

pass-through entity as of the end of

complete Part III. If the corporation is

Rev. Proc. 2006-46 generally

the short period. For exceptions, see

requesting to change to a natural

applies to trusts that are using an

section 4.02(2) of Rev. Proc. 2006-45.

business year that satisfies the

incorrect tax year and want to change

25-percent gross receipts test, also

3. Is a shareholder of a FSC or

to the required calendar tax year.

include its gross receipts for the most

IC-DISC, as of the end of the short

However, exceptions apply to trusts

recent 47 months (or for any

period. For exceptions, see section

exempt from taxation under section

predecessor).

4.02(3) of Rev. Proc. 2006-45.

501(a), charitable trusts described in

If the answer to the question on

4. Is a FSC or an IC-DISC.

section 4947(a)(1), and grantor trusts

Part II, Section A, line 1, is “Yes”

described in Rev. Rul 90-55.

5. Is an S corporation.

because the applicant is a CFC that

Line 4. A partnership, S corporation,

6. Attempts to make an S

wants to make a one-month deferral

PSC, or trust is precluded from using

corporation election for the tax year

election under section 898(c)(2), see

the automatic approval rules under

immediately following the short

Rev. Proc. 2007-64 which modifies

section 4 of Rev. Proc. 2006-46 if any

period, unless the change is to a

the terms and conditions for this

of the following apply:

permitted S corporation tax year.

election provided in Rev. Proc.

1. The entity is under examination,

7. Is a PSC.

2006-45. If a CFC wants to revoke its

unless it complies with the procedures

one-month deferral election under

8. Is a CFC. For exceptions, see

provided in section 7.03(1) of Rev.

section 898(c)(2) and change its tax

section 4.02(8) of Rev. Proc. 2006-45.

Proc. 2006-46.

year to the majority U.S. shareholder

9. Is a tax-exempt organization,

year (as defined in section 898(c)(3)),

2. The entity is before an appeals

other than an organization exempt

the CFC's controlling domestic

office with respect to any income tax

from tax under section 521, 526, 527,

shareholders must indicate the

issue and its annual accounting

or 528.

change in the tax year on the Form

period is an issue under consideration

10. Is a cooperative association

5471, Information Return of U.S.

by the appeals office.

(within the meaning of section

Persons With Respect To Certain

3. The entity is before a federal

1381(a)) with a loss in the short period

Foreign Corporations, filed with

court with respect to any income tax

required to effect the change of

respect to the CFC's first effective

issue and its annual accounting

annual accounting period, unless the

year.

period is an issue under consideration

patrons of the cooperative association

If the answer to the question on

by the federal court.

are substantially the same in the year

Part II, Section A, line 1, is “No,” go to

4. On the date the partnership or S

before the change of annual

Part III.

corporation would otherwise file its

accounting period, in the short period

Line 3. If a corporation's interest in a

application, the partnership's or S

required to effect the change, and in

pass-through entity, CFC, FSC, or

corporation's annual accounting

the year following the change.

period is an issue under consideration

IC-DISC (related entity) is disregarded

11. Is a corporation leaving a

under section 4.02(2) or 4.02(3) of

in the examination of a partner's or

consolidated group. The corporation

Rev. Proc. 2006-45 because the

shareholder's federal income tax

is not allowed to use the automatic

return or an issue under consideration

related entity is required to change its

approval request procedures during

tax year to the corporation's new tax

by an area office or by a federal court

the consolidated group's tax year in

year (or, in the case of a CFC, to a tax

with respect to a partner's or

which the corporation ceased to be a

shareholder's federal income tax

year beginning one month earlier than

member of the consolidated group.

the corporation's new tax year), the

return.

See Rev. Proc. 2007-64 for details.

related entity must change its tax year

12. Has a required tax year (for

Note. If any of the above

concurrently with the corporation's

example, a real estate investment

circumstances apply, you may still be

change in tax year, under Rev. Proc.

trust), unless the corporation is

eligible under the automatic approval

-5-

Instructions For Form 1128 - Application To Adopt, Change, Or Retain A Tax Year Page 5

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