Rev. Rul. 77-236

The purpose of this Revenue Ruling is to clarify Rev. Rul. 75-56, 1975-1 C.B. 98.

The next to last paragraph of Rev. Rul. 75-56 states as follows:

Accordingly, the taxpayer in the instant case, having adopted a method of accounting to capitalize the items in question, is precluded from changing that method for the years 1971, 1972, and 1973. However, with respect to a later year, X may request permission to change its method of accounting under the provisions of Rev. Proc. 70-27, 1970-2 C.B. 509, by filing Form 3115. Such a request would ordinarily be granted for expenses that may be capitalized under section 266 of the Code, if such expenses are paid or accrued for a year during which the request is filed [Emphasis added]

It has come to the attention of the Internal Revenue Service that the last sentence of the next to last paragraph of Rev. Rul. 75-56, emphasized above, may have been misinterpreted as permitting a change in accounting method without the necessity of computing an adjustment pursuant to section 481 of the Internal Revenue Code of 1954.

Such sentence was not intended to permit a change in accounting method without the necessity of computing an adjustment pursuant to section 481 of the Code.

Accordingly, Rev. Rul. 75-56 is clarified by deleting the last sentence of the next to the last paragraph.

Rev. Rul. 75-56 is clarified.