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The Internal Revenue Service Office of Chief Counsel, in a chief counsel advice memorandum released Dec. 23, said a taxpayer that previously elected to defer advance payments under Revenue Procedure 2004-34 is required to obtain consent under Section 446(e) if it adopts new accounting standards and wants to use the revised financial statement method in determining the inclusion of advance payments in gross income for tax purposes.
Consent for such a change in method of accounting is obtained by following the automatic consent procedures of Rev. Proc. 2011-14, the office said in CCA 201151022 .
Section 446(e) generally requires that a taxpayer who changes the method of accounting on the basis of which it regularly keeps its books must, before computing taxable income under the new method, secure the consent of the IRS commissioner, the office said. Regulations under that section specify such consent is required “whether or not such method is proper or permitted under the Internal Revenue Code or the regulations thereunder,” it said.