Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 76-43

1976-1 C.B. 113

Section 37
Section 442

IRS Headnote

Change in accounting period; earlier tax benefit. A taxpayer who attained age 65 in February 1975 will not be granted permission to change from a calendar year accounting period to one ended March 31, 1975, to enable taxpayer to benefit from the retirement income credit provisions of section 37 of the Code at an earlier date.

Full Text

Rev. Rul. 76-43

The Internal Revenue Service has received for approval an application of an individual taxpayer for permission to change the taxpayer's accounting period under the circumstances described below.

A, an unmarried individual taxpayer who attained the age of 65 on February 1, 1975, timely filed a Form 1128 (Application for Change in Accounting Period) in which permission was requested to change the annual accounting period from a taxable year ending December 31 to a taxable year ending March 31, effective March 31, 1975. A's stated purpose in requesting such change is to receive the benefits of section 37 of the Internal Revenue Code of 1954 regarding the retirement credit for 65 year old individuals earlier than possible using the present accounting period.

Section 1.442-1(b)(1) of the regulations provides, in part, that in order to secure prior approval of a change of a taxpayer's annual accounting period, the taxpayer must file an application on Form 1128 with the Commissioner of Internal Revenue, Washington, D.C. 20224, to effect the change of accounting period. If the short period involved in the change ends after December 31, 1973, such form shall be filed on or before the 15th day of the second calendar month following the close of such short period. Approval will not be granted unless the taxpayer and the Commissioner agree to the terms, conditions, and adjustments under which the change will be effected. In general, a change of annual accounting period will be approved where the taxpayer establishes a substantial business purpose for making the change. In determining whether a taxpayer has established a substantial business purpose for making the change, consideration will be given to all the facts and circumstances relating to the change, including the tax consequences thereof. The agreement between the taxpayer and the Commissioner under which the change will be effected shall, in appropriate cases, provide terms, conditions, and adjustments necessary to prevent a substantial distortion of income which otherwise would result from the change.

The purpose for the change, to receive certain benefits of section 37 of the Code 1 year earlier than under A's present accounting period, does not constitute a substantial business purpose.

Accordingly, A's application to change the annual accounting period will not be approved on the ground that A has failed to establish a substantial business purpose for such change.