Form 3115 (Rev. 12-81)

Page 4

General Instructions

Note: If you are applying for a change
in accounting period, use Form 1128.

Paperwork Reduction Act Notice

The Paperwork Reduction Act of 1980
says we must tell you why we are collect-
ing this information, how we will use it,
and whether you have to give it to us. We
ask for the information to carry out the
Internal Revenue laws of the United
States. We need it to ensure that you are
complying with these laws and to allow
us to figure and collect the right amount
of tax. You are required to give us this
information.

Purpose of Form

File this form to request a change in
your accounting method, including the ac-
counting treatment of any item.

Generally, applicants must complete
Section A. In addition, complete the appro-
priate section (B through J) for which a
change is desired.

You must give all relevant facts, includ-
ing a detailed description of your present
and proposed methods, You must also
state the reason(s) you believe approval
to make the requested change should be
granted. Attach additional pages if more
space is needed for explanations. Each
page should show your name, address, and
identifying number,

State whether you desire a conference
in the National Office if the Service pro-
poses to disapprove your application.

Time and Place for Filing

Generally, applicants must file this form
with the Commissioner of Internal Reve-
nue, Washington, DC 20224, within the
first 180 days of the tax year in which it is
desired to make the change.

Note: If this form is being filed in ac-
cordance with Rev. Proc. 74-11, see Sec-
tion I below.

Identifying Number

Individuals.—Individuals should enter
their social security number in this block.
If the application is made on behalf of a
husband and wife who file their income tax
return jointly, enter the social security
numbers of both. However, if an individual
is engaged in a trade or business, enter the
employer identification number instead of
the social security number.

Other.—Applicants other than an_in-
dividual should enter their employer identi-
fication number in this block.

Signature

Individuals.—An indi i
change should sign the application. If the
application pertains to a husband and wife,
the names of both should appear in the
heading and both should sign.

Partnerships——The form should be
signed with the partnership name followed
by the signature of one of the partners and
the words ‘Member of Partnership.”

Corporations, Cooperatives, and Insur-
ance Companies.—The form should show
the name of the corporation, cooperative,
or insurance company and the signature
of the president, vice president, treasurer,
assistant treasurer, or chief accounting of-
ficer (such as tax officer) authorized to

sign, and their official title. Receivers,
trustees, or assignees must sign any appli
cation they are required to file. For a sub-
sidiary corporation filing a consolidated re-
turn with its parent, the form should be
signed by an officer of the parent corpo-
ration.

Fiduciaries.—The form should show the
name of the estate or trust and be signed
by the fiduciary, executor, executrix, ad-
ministrator, administratrix, etc. having
legal authority to sign, and his or her title.

Preparer other than partner, officer,
etc.—The signature of the individual or
firm preparing the form should appear in
the space provided on page 1. An applica-
tion made by an agent on behalf of an ap-
plicant must be accompanied by a power
of attorney authorizing the agent to sign
for the applicant. If the agent is also au-
thorized to represent the applicant before
the IRS, receive a copy of the requested
ruling, or perform any other act(s), the
power of attorney must reflect such au-
thorization(s).

Specific Instructions

Section A—(Item 10, page 1)—If pro-
viding the requested information causes
you financial hardship or other serious
inconvenience, you may do the following:

(1) Enter your best estimate of the per-
cent of the section 481(a) adjust-
ment that belongs to each year;
an

(2) Explain in detail why you cannot
provide the requested information.

If we later examine your return for the
year of the change or for later years, we
have the right to verify your statement at
that time.

Section B.—(Item 2(b), page 2)—In-
clude any amounts reported as income in
a prior year although the income had not
been accrued (earned) or received in the
prior year; for example, discount on install-
ment loans reported as income for the year
in which the loans were made instead of
for the year or years in which the income
was received or earned.

Section D.—(Item 2, page 2)—A special
procedure is available to change your
method of accounting for bad debts from
the specific charge-off method to the re-
serve method. Generally, if you comply
with Rev. Proc. 64-51, as modified, you
may assume the change has been ap-
proved.

Rev. Proc, 64-51, modified by Rev. Proc.
77-39, does not apply to your trade re-
ceivables that include items of unrealized
income for Federal income tax purposes.

The Bad Debt Reserve must be deter-
mined as follows:

(1) Add together the net losses on bad

debts for 5 years preceding the tax
year of change.

(2) Divide this total by the sum of the
amounts of outstanding trade re-
ceivables at the close of each of the
5 years.

Multiply the amount of outstanding
trade receivables at the close of the
tax year of change by the resulting
decimal in (2). This amount is the
Bad Debt Reserve, the deduction
for which is to be prorated over 10
years.

(3)

Section E.—Applicants must give com-
plete details about the old method of valu-

ing inventory and the proposed method.
State whether all or part of your inventory
is involved in the change.

Inventories of retail merchants.—The re-
tail method of pricing inventories does not
contemplate valuation of goods at the re-
tail selling price. The retail selling prices
of goods on hand must be reduced to
approximate cost or cost or market, which-
ever is lower, by the adjustments required
in Regulation section 1.471-8.

Inventories of manufacturers and proc-
essors.—Applicants requesting to change
to the full absorption method of inventory
costing must attach a schedule showing
the treatment, under both their present
and proposed methods, of all costs listed
in Regulation sections 1.471—11(b)(2), (c)
(2)(i) and (c)(2)(ii) for Federal income tax
purposes, and all costs listed in or sub-
ject to Regulation section 1.471-11(c)(2)
(iii) for tax and financial report purposes.
If you plan to leave out one or more costs
listed in Regulation section 1.471-11(c)(2)
(iii) from the computation of the amount of
inventoriable costs under the full absorp-
tion method, you must also attach the data
required by either section 5.02 or 5.03
Swhichever is appropriate) of Rev. Proc.

0.

LIFO_ inventory changes.—Attach a
schedule with all the required computa-
tions when changing the method of figur-
ing LIFO inventories. If you are changing
from the LIFO to a non-LIFO method, at-
tach a schedule with the following addi-
tional information:

(1) The specific types and classes of
goods in the LIFO inventories in-
volved in the proposed change and
the comparative values of such in-
ventories as of the end of the tax
year preceding the year of change
determined by (a) the LIFO method
and (b) the proposed method and
basis (such as cost or lower of cost
or market).

State whether the proposed method
and basis conforms to the inventory
method currently used with respect
to non-LiFO inventories, if any, or
that such method is otherwise con-
sistent with Regulation section
1.472-6.

Section F.—Regulation section 1.451—
3(b)(1) provides that, except as provided
in Regulation section 1.451-3(b)(1)(ii),
the term “long-term contract” means a
building, installation, construction, or
manufacturing contract that is not com-
pleted within the tax year in which it is
entered into.

Section 1.—Rev. Proc. 74-11 provides
a procedure whereby applicants are con-
sidered to have obtained the consent of
the Commissioner to change their method
of accounting for depreciation. You_must
file Form 3115 with the Service Center
where your return will be filed within
the first 180 days of the tax year in which
it is desired to make the change. Attach a
copy of the form to the income tax return
for the tax year of the change.

Section J.—Generally, this section
should be used for requesting changes in
a method of accounting for which provi-
sion has not been made elsewhere on this
form.

If you are making an election under
Code section 458 or 466, or section 373(c)
(2) of the Revenue Act of 1978, show the
applicable information required under Reg-
ulation section 1.458—-10, or Temporary
Regulation section 5.466—1 or 5.466—2.

(2)

4 U.S. GPO: 1982 - 363-426 E, 1, NO. 73-0667115,


rm 8115 | Application for Change in Accounting Method | (ro.

(Rev. Dec. 1981) > For Paperwork Reduction Act Notice, see instructions on page 4. CHECK ONE

Department of the, Teaasury Note: If you are applying for a change in accounting period, use Form 1128. Ly Individual

Name of applicant (if joint return is filed, show names of you and your spouse) Identifying Number (See instructions) Partnership

( Corporation

Address (Number and street) [J Cooperative (Sec.
1381(a))

City or town, State, and ZIP code Oo Insurance co. (Secs.
801, 821, or 831)

‘Section A. Applicable To All Filers [ Other (Specify)
NOTE: Are you making an election under section 458 or 4667... . 1 e+ eee ee ww we es Yes [] NO

If “Yes,” see Instructions for Section J on page 4. Do not fill in Section AL
1 The following change in accounting method is requested (check and complete appropriate spaces):
(a) [J Overall method of accounting: from _ to
(b) [7] The accounting treatment of (identify item)
from (present method) D>... _. to (new method) >
(c) If Partnership, show number of partners If Subchapter S corporation, show number of shareholders >.

(d) Number of tax years present method has been used. . . woe ee ee ee
(e) If change is granted, will this method be used for financial reporting purposes?. . - - - 7. se

If “No,” please explain D>.

2 (a) If a change is requested under 1(b) above, check the present overall method of accountin
( Accrual im} Cash [] Hybrid (if a hybrid method is used, explain treatment of material items in detail)

(b) if a change to the Reserve Method is requested, is it being made under Rev. Proc. 64-517. . . . . - [J Yes [] No
(c) If a change in depreciation method is requested, is it being made under Rev. Proc. 74-117. . . . . . [] Yes [] No
(d) Are you a manufacturer to whom Regulation section 1.471-11 applies? . . . . . . . . . . . +E] Yes []No
(e) If “Yes,” block is checked for line 2(d), are the items involved in this request properly inventoriable in ac-

cordance with Regulation section 1471-117. . . . . . . . sos oe + we ee +). Yes [No

If “Yes,” report the items and amounts on a separate page.
3 Tax year of change begins (mo., day, year) D>-
4 (a) Nature of business and principal source of income P....

(b) Applicant's area code and telephone number D> __
5 If engaged in a business or professio
tax years preceding the year of change:

-- and ends (mo., day, year)

(c) District Director's office having jurisdiction >>
‘a) Enter your taxable income or (loss)* from operations for tax purposes for the five (5)

Yet ended 19 jearenaedTM 19 yearengedTM 19 jearended = 19 Suapreced"= 19
$.. $ $

(b) Enter the amount of net operating loss to be carried over to the year of change, ifany. . . .

(c) Amount of investment credit carryover to year of change, ifany. . - - - - + +

(d) Other credit carryover, if any. (Identify) >

“Individuals enter net profit or (loss) from business; partnerships enter ordinary income or (loss).
In the last 10 years, have you changed, or requested permission to change, your accounting period, your over-

all method of accounting, or the accounting treatment of any item? . . -[] Yes [] No
If “Yes,” attach copy of ruling letter(s), if available. If copy of ruling letter(s) is not available, explain and g give

date permission was granted.

a

7 \s applicant a member of an affiliated group filing a consolidated return for the tax year of change?. . . . « [| Yes [| No
(a) If “Yes,” state parent corporation’s name, identifying number, address, tax year, and Service Center where
return is filed p>.
(b) If “Yes,” provide the information requested in 5(a) above for each member of the affiliated group (attach schedule).
(c) If “Yes,” do all other members of the affiliated group employ the method of accounting for which the change
is requested? [] Yes [] No. If “No,” explain >_
8 Is there an issue involving an overall change in accounting method or a change in the treatment of a material

item pending before a field office of the IRS or any Federalcourt?. . 2... 2 ee ee ew ee ee [Ves No
If “Yes,” explain D>...
9 Does the adjustment under section 481(a) include a pre-1954 amount?. . . . . . . « « » . + + « £] Yes [] No
10 Enter section 481(a) adjustments that would have been Ast preceding 19 3d preceding 19 Sdpreceding 19

required if the requested change had been made for each
tax year of the 3-year period preceding the year of change
(see instructions for Section Aon page 4)... $ $ $

Under penalties of perjury, | declare that | have examined this application, including accompanying schedules and statements, and to the best of my knowledge and belie it is true,
correct, and complete. Declaration of preparer (other than applicant) 1s based on all information of which preparer has any knowledge.

Bate

Signature of individual or firm preparing the application (See General Instructions on page 4)


Form 3115 (Rev. 12-81) Page 2
Section B. Change in Overall Method of Accounting

1 If change is from the cash to the accrual method, check method to be employed for treating bad debts: [—] Specific charge-off [] Reserve

If reserve method is to be adopted, complete item 2 under Section D below.

2 The following amounts should be stated as of the end of the tax year preceding the year of change. If none, state ‘‘None.” (Al-
though some of the items listed below may not have been required in the computation of your taxable income due to your present
method of accounting, it is necessary that they be entered here for this form to be complete. Show amounts attributable to long-
term contracts on page 3, Section F.)

‘Show by (/) how treated on last year’s return

Amount Included in income or Excluded from income or
deducted as expense not deducted as expense

(a) Income accrued but not received .

(b) Income received before the date on which it was earned,
State nature of income. If discount on installment loans,
see Section C below _

(c) Expenses accrued but not paid
(d) Other (specify) _

(e) Prepaid expense previously deducted . . . 7/ V/
(f) Supplies on hand previously deducted . . .
(g) Inventory . ..

Enter the amount of ‘ending i i ventory reported

on your return for the tax year preceding the

year of change. $ . jj

(h) Reserve for bad debts

Net adjustment... «ee ee a
3 Nature of inventory >» .. 4 Method used for valuing inventories > ...
5 If the change is from the a ual to the cash method, have any receivables been sold in the past three years? [] Yes [] No
If “Yes,"’ enter the amounts sold for each of the three years on a separate page.
6 Attach copies of Profit And Loss Statement (Schedule F (Form 1040) in the case of Farmers) and Balance Sheet, if applicable, as of

the close of the tax year preceding the year of change. State accounting method used when preparing balance sheet. If books of
account are not kept, attach copy of the business schedule provided with your Federal income tax return or return of income for
that period. If amounts in 2 above do not agree with those shown on profit and loss statement and balance sheet, explain on sepa-
rate page.

Section C. Change in Method of Reporting Interest (Discount) on Installment and Other Loans

»

Change with respect to interest on [~] Installment loans, [~] Commercial loans, and [7] Other loans (explain) p>

Amount of earned or realized interest that has not been reported on your return as of the end of the tax
year preceding the year of change . . . . woe ee on)
Amount of unearned or unrealized interest that h has been reported o ‘on your return as of the end ‘of the tax

year preceding the year of change . . Be ee
4 Method of rebating in event of prepayment of loans >
Section D. Change in Method of Reporting Bad Debts

If a change to the Reserve Method is requested and applicant has installment sales, are such sales reported on the installment method? [] Yes [_] No

If “Yes,"" show whether change relates to: [_] Installment sales, [7] Sales other than installment sales, or [_] Both.
2 Ifa change to the Reserve Method is requested, provide the following information for the five tax years preceding the year of change:
Ist preceding 2d preceding ‘3d preceding 4th preceding ‘Sth preceding
year year year year year

Nn

wo

ra

Total sales . . soe ee
Deductions for specific bad debts charged off *
Recoveries of bad debts deducted in prior
yeas... ee ee ee
Year-end balances:
Trade accounts receivable . . .
Trade notes receivable*. . .
Installment accounts receivable *
Other receivables (explain in detail)
3 If a change to the method of deducting specific bad debt items is requested, enter the amount in reserve for
bad debts at end of the year preceding the year of change. . . - - - ss ee tS
1 If your return was examined, enter amount allowed as a result of the examination.

2 If loan company, enter only capital portion.
2 Applicable only’ to receivables attributable to sales reported on installment method. Enter only the capital portion of these receivables.



Form 3115 (Rev. 12-81) If no entries are made below, tear off this page and file only pages 1 and 2 Page 3
Section E. Change in Method of Valuing Inventories. See instruction for Section E on page 4.

1 Nature of all inventories > .
2 Method of identifying goods in inventory. . . . . - . . «J Specific identification [] FIFO CO Liro.
If “LIFO,” attach copy of Form 970 adopting that method and copies of any Forms 970 filed to extend the use of the method.
3 Show method and value of all inventories at the end of the tax year preceding the year of change under:
fa) Present method D>...

(b) New method b>
(c)_ If pre-1954 adjustment is involved, provide only those amounts that can be substantiated .
Section F. Change in Method of Reporting Income from Contracts

1 Are your contracts long-term contracts as defined in Regulation section 1.451-3? . . . . . . - (7 Yes [] No
2 Method used for reporting long-term contracts . [] Completed [7] Percentage of completion [] Accrual [] Other (explain)
3 Method used for reporting short-term contracts . Loe -[7] Accrual [] Other (explain)
4 Adjustment required under section 481(a). . . . . - . . . oa woe ee $

Section G. Change in Method of Treating Vacation Pay
1 Is the plan(s) fully vested as of the end of the tax year preceding the year of the change?

2 If “Yes,” enter the amount of accrued vacation pay as of the end of the tax year preceding the year of change .
3 Number of tax years plan(s) has been vested... ee ee
Section H. Change in Overall Method of Reporting Income of Farmers to Cash Receipts and Disbursements Method

Note: Also complete Section B. Ist preceding yr. 2d preceding yr. ‘3d preceding yr. _| 4th preceding yr. | Sth preceding yr.

Total income from all sources .
Net farm profit or (loss)...
3 Inventory: Crops, etc. ©... |.
Livestock held for sale:
Purchased . - . « + s
Raised 2. 2 1 ee ee
Livestock held for draft, breed-
ing, sport, or dairy purposes:
Purchased . . . - se
Raised . . . e
Total inventory .
Method used to value inventory (check appropriate block):
[J Cost [-] Cost or market, whichever is lower ["] Farm price [7] Unit livestock price [7] Other (explain on separate page)
Section I. Change in Method of Accounting for Depreciation

Applicants desiring to change their method of accounting for depreciation must complete this section. This information must be sup-
plied for each account for which a change is requested. Note: Certain changes in methods of accounting for depreciation may be filed
with the Service Center where your return will be filed. See Rev. Proc. 74-11 for the methods covered.

»

n

1 Date of acquisition >. .
2 Are you the original owner or the first user of the property?. . . . . . . 2 ss - +E] Yes [] No
3 Is depreciation claimed under Regulation section 1.167(a)-11 (CLADR)?. . . . . - . - +. + -(] Yes [] No
If “Yes,” the only changes permitted are under Regulation section 1.167(a)—11(c)(1)(iii). Identify these changes on the tax return
for the year of change.
4 Is the property public utility property?. 2... ee ee ee ee ee ee ww ee Yes No
5 Location of the property (city and State) >.
6 Type or character of the property >...
7 Cost or other basis of the property and adjustments thereto (exclude land) .
8 Depreciation claimed in prior tax years (depreciation reserve). © - © + 6 + ee ee ee ee
9 Estimated salvage value. . . - - - + ee
10 Estimated remaining useful life of the property >>
11 If the declining balance method is requested, show percentage of straight line rate >
12 Other information, if any >

yaw

Section J. Change in Method of Accounting Not Listed Above (See instructions)