Form 3115 (Rev. 12-2009) 3115 SAMPLE COMPANY 12-3456789 Page 8 Part III Method of Cost Allocation (see instructions) (continued)Section C—Other Costs Not Required To Be Allocated (Complete Section C only if the applicant is requesting to change itsmethod for these costs.) Present method Proposed method 1 Marketing, selling, advertising, and distribution expenses . . . . . . . . . . . 2 Research and experimental expenses not included in Section B, line 26 . . . . . . 3 Bidding expenses not included in Section B, line 22 . . . . . . . . . . . . 4 General and administrative costs not included in Section B . . . . . . . . . . 5 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 6 Cost of strikes . . . . . . . . . . . . . . . . . . . . . . . . . 7 Warranty and product liability costs . . . . . . . . . . . . . . . . . . 8 Section 179 costs . . . . . . . . . . . . . . . . . . . . . . . . 9 On-site storage . . . . . . . . . . . . . . . . . . . . . . . . .10 Depreciation, amortization, and cost recovery allowance not included in Section B, line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Other costs (Attach a list of these costs.) . . . . . . . . . . . . . . . .Schedule E—Change in Depreciation or Amortization (see instructions)Applicants requesting approval to change their method of accounting for depreciation or amortization complete this section.Applicants must provide this information for each item or class of property for which a change is requested.Note. See the List of Automatic Accounting Method Changes in the instructions for information regarding automatic changesunder sections 56, 167, 168, 197, 1400I, 1400L, or former section 168. Do not file Form 3115 with respect to certain late electionsand election revocations (see instructions).1 Is depreciation for the property determined under Regulations section 1.167(a)-11 (CLADR)? . . . . Yes No If “Yes,” the only changes permitted are under Regulations section 1.167(a)-11(c)(1)(iii).2 Is any of the depreciation or amortization required to be capitalized under any Code section (e.g., section Yes No 263A)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If “Yes,” enter the applicable section ▶3 Has a depreciation, amortization, or expense election been made for the property (e.g., the election under Yes No sections 168(f)(1), 179, or 179C)? . . . . . . . . . . . . . . . . . . . . . . . . If “Yes,” state the election made ▶4a To the extent not already provided, attach a statement describing the property being changed. Include in the description thetype of property, the year the property was placed in service, and the property’s use in the applicant’s trade or business orincome-producing activity.b If the property is residential rental property, did the applicant live in the property before renting it? . . Yes Noc Is the property public utility property? . . . . . . . . . . . . . . . . . . . . . . Yes No5 To the extent not already provided in the applicant’s description of its present method, attach a statement explaining how the property is treated under the applicant’s present method (e.g., depreciable property, inventory property, supplies under Regulations section 1.162-3, nondepreciable section 263(a) property, property deductible as a current expense, etc.).6 If the property is not currently treated as depreciable or amortizable property, attach a statement of the facts supporting the proposed change to depreciate or amortize the property.7 If the property is currently treated and/or will be treated as depreciable or amortizable property, provide the following information for both the present (if applicable) and proposed methods:a The Code section under which the property is or will be depreciated or amortized (e.g., section 168(g)).b The applicable asset class from Rev. Proc. 87-56, 1987-2 C.B. 674, for each asset depreciated under section 168 (MACRS) or under section 1400L; the applicable asset class from Rev. Proc. 83-35, 1983-1 C.B. 745, for each asset depreciated under former section 168 (ACRS); an explanation why no asset class is identified for each asset for which an asset class has not been identified by the applicant.c The facts to support the asset class for the proposed method.d The depreciation or amortization method of the property, including the applicable Code section (e.g., 200% declining balance method under section 168(b)(1)).e The useful life, recovery period, or amortization period of the property.f The applicable convention of the property.g A statement of whether or not the additional first-year special depreciation allowance (for example, as provided by section 168(k), 168(l), 168(m), 168(n), 1400L(b), or 1400N(d)) was or will be claimed for the property. If not, also provide an explanation as to why no special depreciation allowance was or will be claimed. Form 3115 (Rev. 12-2009)
FORM 3115 ATTACHMENTS 3115 SAMPLE COMPANY, EIN 12-3456789 (DCN 192) ATTACHMENT 1 FORM 3115, PART II, LINE 12ITEM BEING CHANGED: FIXED ASSETS ACQUIRED OR PRODUCEDPRESENT METHOD: NO IDENTIFICATION OF UNITS OF PROPERTY ARE BEINGPROPOSED METHOD: CHANGED UNDER §1.263(a) – 3(e)PRESENT OVERALLACCOUTING METHOD IN GENERAL, AMOUNTS PAID FOR TANGIBLE ASSESTS ARE CAPITALIZED AS FIXED ASSET. AMOUNTS PAID FOR TANGIBLE ASSETS ARE DEDUCTED: WHEN THE LIFE OF THE ASSET IS EXPECTED TO BE ONE YEAR OR LESS WHEN THE AMOUNT PAID FOR THE PROPETY MAY BE PROPERLY EXPENSED UNDER IRS §179 CHANGE TO CAPITALIZING ACQUISITION OR PRODUCTION COSTS AND, IF DEPRECIABLE, TO DEPREACIATING SUCH PROPERTY UNDER SECTION 167 OR SECTION 168 [§1.263(a) – 2] CASH ATTACHMENT 2 FORM 3115, PART II, LINE 13APPLICANT PROVIDES GENERAL BUSINESS CONSULTING SERVICES. BUSINESS CODE IS 541990. THEAPPLICANT HAS ONLY ONE TRADE OR BUSINESS ATTACHMENT 3 FORM 3115, PART V, LINE 25TAXPAYER BELIVES THERE IS NO §481 ADJUSTMENT DUE TO EXTENSIVE PAST USE OF §179DEDUCTION AND BONUS DEPRECIATION DEDUCTION TO EXPENSE THE COST OF ACQUIRED,PRODUCED, OR IMPROVED PROPERTY. TAXPAYER HAS NO CAPITALIZED COSTS THAT WOULD BEDEDUCTIBLE UNDER PROPOSED ACCOUTING METHOD
Exhibit D: Rev Proc. 2015-20 25
SECTION 1. PURPOSEThis revenue procedure modifies Rev. Proc. 2015-14, 2015-5 I.R.B 450, to permit a smallbusiness taxpayer, defined as a business with total assets of less than $10 million or averageannual gross receipts of $10 million or less for the prior three taxable years, to make a certaintangible property changes in methods of accounting with an adjustment under § 481(a) of theInternal Revenue Code (the Code) that takes into account only amounts paid or incurred, anddispositions, in taxable years beginning on or after January 1, 2014. In addition, for their firsttaxable year that begins on or after January 1, 2014, small business taxpayers are permitted tomake certain tangible property changes without filing a Form 3115. This revenue procedure alsorequests comments on whether it is appropriate to increase the de minimis safe harbor limitprovided in § 1.263(a)-1(f)(1)(ii)(D) of Income Tax Regulations for a taxpayer without anapplicable financial statement (AFS) to an amount greater than $500, and, if so , what amountshould be used and the justification for considering that amount appropriate..05 To further ease the administrative burden faced by small business taxpayers in prospectivelyapplying the final tangible property regulations beginning in 2014, this revenue proceduremodifies certain procedures provided in Rev. Proc. 2015-14 to permit small business taxpayersto make changes in methods of accounting with a § 481(a) adjustment that takes into accountonly amounts paid or incurred, and dispositions, in taxable years beginning on or after January 1,2014. This modification means that, effectively, small business taxpayers making these changesin method of accounting for the first taxable year that begins on or after January 1, 2014, mayelect to make the change on a cut-off basis..08 A small business taxpayer choosing the option of calculating a § 481(a) adjustment that takesinto account only amounts paid or incurred, and dispositions, in taxable years beginning on orafter January 1, 2014, does not receive audit protection under section 8.01 of Rev. Proc. 2015-13(or any successor) for taxable years beginning prior to January 1, 2014.SECTION 8. TRANSITION RULEA taxpayer that (a) meets the scope requirements of this revenue procedure, (b) wants to use thisrevenue procedure for its first taxable year beginning on or after January 1, 2014, and (c)previously filed its federal tax return for that taxable year with a Form 3115 to change to amethod of accounting specified in this revenue procedure may withdraw its Form 3115 by filingan amended federal tax return using this revenue procedure. The amended federal tax return mustbe filed on or before the due date of the taxpayer’s federal tax return for its first taxable yearbeginning on or after January 1, 2014, including extensions. The withdraw Form 3115 will notbe taken into account for purposes of applying section 5.05 of Rev. Proc. 2015-13. 26
What it means:The Internal Revenue Service made it easier for small business owners to comply with the finaltangible property regulations.Requested by many small businesses and tax professionals, the simplified procedure is availablebeginning with the 2014 return taxpayers are filling out this tax season. The new procedureallows small businesses to change a method of accounting under the final tangible propertyregulations on a prospective basis for the first taxable year beginning on or after January 1, 2014.Also, the IRS is waiving the requirement to complete and file a Form 3115 for small businesstaxpayers that choose to use this simplified procedure for 2014.“We are pleased to be able to offer this relief to small business owners and their tax preparers intime for them to take advantage of it on their 2014 return,” said IRS Commissioner JohnKoskinen.”We carefully reviewed the comments we received and especially appreciate thevaluable feedback provided by the professional tax community on this issue.”The new simplified procedure is generally available to small businesses, including soleproprietors, with assets totaling less than $10 million or average annual gross receipts totaling$10 million or less. Details are in Revenue Procedure 20115-20.The IRS noted that some small business taxpayers may choose to file a Form 3115 in order toretain a clear record of a change in method of accounting or to make permissible concurrentautomatic changes on the same form, whereas other small business taxpayers may prefer theadministrative convenience of being able to comply with the final tangible property regulationsin their first tax year that begins on or after January 1, 2014, solely through the filing of a federaltax return, The concern remains that those businesses which do not file a Form 3115 may not beprotected in the event of an IRS audit.Accordingly, for the first tax year that begins on or after January 1, 2014, small businesstaxpayers that choose to apply the tangible property regulations prospectively to amounts paid orincurred, and dispositions, in tax years beginning on or after January 1, 2014, have the option ofmaking certain tangible property and dispositions changes in method of accounting on thefederal tax return without including a separate Form 3115 or separate statement.Therefore, the relief is only available for those assets purchased after January 1, 2014 and onlyapplies to the 2014 tax year. A taxpayer does not receive audit protection if the changes wereapplied on a cutoff basis (does not have a § 481 (a) adjustment) for amounts subject to changefor tax years beginning prior to January 1, 2014.Also, those taxpayers not filing the Form 3115 may not make a late partial disposition election.The late partial disposition election allows a taxpayer to claim a retirement loss on theundepreciated basis of previously retired structural components, such of the roof of a building.These losses can be significant for even small taxpayers. Consequently, many taxpayers whootherwise qualify for the relief provided in the new revenue procedure may choose not toexercise it. Similarly, taxpayers who would compute sizeable net negative (favorable) Code Sec. 27
481(a) adjustments for implementing the repair regulations by finding significant capitalizedexpenditures that are deductible under the repair regulations may decline the relief.Rev. Proc. 2015-20 is effective for tax years beginning on or after January 1, 2014. It alsoincludes a transition rule, providing that a taxpayer may withdraw its Form 3115 by filing anamended federal tax return using this revenue procedure if the taxpayer: Meets the scope requirements of this revenue procedure Wants to use this revenue procedure for its first tax year beginning on or after January 1, 2014 Previously filed its federal tax return for that tax year with a Form 3115 to change to a method of accounting specified in Rev. Proc. 2015-20 The amended federal tax return mist be filed on or before the due date of the taxpayer’s federal tax return for its first tax year beginning on or after January 1, 2014, including extensions. The withdrawn Form 3115 will not be taken into account for purposes of applying section 5.05 Rev. Proc. 2015-13. The revenue procedure also requests comment on whether the $500 safe-harbor threshold should be raised for businesses that choose to deduct, rather than capitalize, certain capital expenses. 28
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