Rev. Proc. 55-8

The Internal Revenue Service desires to clarify the procedure set forth in Revenue Ruling 55-539, page 246 of this Bulletin, with respect to taxpayers whose tax liability is affected by Public Law 74, 69 Stat. 134, I.R.B. 1955-28, 21, repealing sections 452 and 462 of the Internal Revenue Code of 1954.

A taxpayer filing an income tax return on or after June 15, 1955, for a taxable year ending on or before such date, may elect to apply the accounting methods provided in sections 452 and 462 of the Code. The election may be exercised-

(1) By computing the tax liability shown on such return as though the provisions of sections 452 and 462 of the Code had not been repealed. In such a case, the taxpayer must file on or before December 15, 1955, a statement on Form 2175, Statement to be Filed Pursuant to Repeal of Sections 452 and 462 of the Internal Revenue Code of 1954, showing the increase in tax liability resulting from the repeal of sections 452 and 462 of the Code, or

(2) By computing the tax liability without regard to sections 452 and 462 of the Code. In this case, Form 2175 must be filed with the return. However, taxable income and the tax liability computed with the application of sections 452 and 462 of the Code shall be shown on lines 8 and 14, respectively, of Form 2175, in lieu of the amounts otherwise called for on those lines.

However, taxpayers are advised that the waiver of interest provisions in section 4(b)(3) of Public Law 74, supra , do not apply unless the taxpayer has reasonably interpreted and applied sections 452 and 462 of the Code. Compliance with the regulations issued under those sections will meet this requirement.

If a taxpayer does not make an election to have the provisions of sections 452 and 462 of the Code apply, he shall not be entitled to the savings provisions of section 4 of Public Law 74, supra .

Revenue Ruling 55-539, page 246 of this Bulletin, amplified.