Rev. Rul. 63-55

Advice has been requested in connection with Revenue Ruling 60-133, C.B. 1960-1, 187, and Revenue Ruling 61-7, C.B. 1961-1, 166, as to the circumstances under which it is deemed that a taxpayer otherwise on the accrual method is using a ratable accrual method for real or personal property taxes and, thus, is not entitled to deduct more than twelve months' taxes in one taxable year.

Accrual-method taxpayers who deduct property taxes on their books and in their Federal income tax returns ratably over a period of time, rather than in a lump sum on the assessment (or lien or personal liability) date, will be considered to be following a ratable accrual method for the purpose of this ruling, whether or not a formal election to adopt the ratable accrual method of accounting provided by section 461(c) of the Internal Revenue Code of 1954 has been made, and will not be permitted a deduction for more than twelve months' real or personal property taxes in any one taxable year. See Revenue Ruling 57-539, C.B. 1957-2, 303; Broida, Stone & Thomas, Inc. v. United States , 204 Fed. Supp. 841 (1962), affirmed per curiam, 309 Fed.(2d) 486 (1962).

However, to the extent that Revenue Ruling 60-133 and Revenue Ruling 61-7 disallow the deduction of two years' property taxes in any year prior to 1961 in which two assessment or other accrual dates fell, they are hereby modified with respect to all accrual method taxpayers except those who had clearly used the cash or the ratable accrual method in deducting property taxes for Federal income tax purposes. Thus, if an accrual method taxpayer has consistently deducted on his Federal income tax return for each year only the amount of the property taxes assessed in that year, thereby demonstrating clearly that he is following a straight accrual rather than a ratable accrual method, he will be considered to be on the assessment date (or lump sum) method for Federal income tax purposes, even if he accrued such taxes ratably on his books.

It is emphasized that the Internal Revenue Service will not require taxpayers to deduct more than twelve months' taxes for their calendar year period.

Revenue Ruling 60-133, C.B. 1960-1, 187, and Revenue Ruling 61-7, C.B. 1961-1, 166, are modified.

¹ Also released as Technical Information Release 460, dated Mar. 12, 1963.