Rev. Rul. 72-541

Advice has been requested whether section 7503 of the Internal Revenue Code of 1954 extends the 21/2 month period specified in section 267(a)(2) when such period ends on Saturday, Sunday, or a legal holiday.

A corporation filed its income tax return for the year 1969 using the accrual method of accounting. Over 50 percent of the outstanding capital stock of the corporation is owned by A, a related taxpayer within the meaning of section 267(b)(2) of the Code. A files his income tax return on the calendar year basis and is on the cash receipts and disbursements method of accounting. On December 31, 1969, the corporation accrued rent of $7,200 to A that was included in deductible expenses claimed by the corporation for the year 1969. Payment of the rent was made to A by check on Monday, March 16, 1970. The 21/2 month period specified in section 267(a)(2) of the Code ended on Sunday, March 15, 1970.

Section 267 of the Code provides:

(a) Deductions Disallowed.--No deduction shall be allowed--

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(2) Unpaid Expenses and Interest.--In respect of expenses, otherwise deductible under section 162 or 212, or of interest, otherwise deductible under section 163--

(A) If within the period consisting of the taxable year of the taxpayer and 21/2 months after the close thereof (i) such expenses or interest are not paid, and (ii) the amount thereof is not includible in the gross income of the person to whom the payment is to be made; and

(B) If, by reason of the method of accounting of the person to whom the payment is to be made, the amount thereof is not, unless paid, includible in the gross income of such person for the taxable year in which or with which the taxable year of the taxpayer ends; and

(C) If, at the close of the taxable year of the taxpayer or at any time within 21/2 months thereafter, both the taxpayer and the person to whom the payment is to be made are persons specified within any one of the paragraphs of subsection (b).

(b) Relationships.--The persons referred to in subsection (a) are:

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(2) An individual and a corporation more than 50 percent in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual;

Section 7503 of the Code provides that when the last day prescribed under authority of the internal revenue laws for performing any act falls on Saturday, Sunday, or a legal holiday, the performance of such act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or legal holiday.

Section 301.7503-1(a) of the Regulations on Procedure and Administration provides that section 7503 of the Code is applicable only in case an act is required under authority of any internal revenue law to be performed on or before a prescribed date or within a prescribed period.

Examples in the regulations and committee reports indicate that the term "act" refers to procedural steps in connection with the determination, collection, or refund of taxes. See section 301.7503-1 of the regulations; H. Rept. 1337, 83d Cong., 109 (1954); and S. Rept. 1622m, 83d Cong., 149 (1954). Accordingly, the corporation's payment of rent to A is not an "act" within the meaning of section 7503 of the Code.

In view of the foregoing, it is held that section 7503 of the Code does not extend the 21/2 month period specified in section 267(a)(2) of the Code.