Rev. Proc. 63-3

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to announce special transitional rules to facilitate compliance with the provisions of section 274(d) of the Internal Revenue Code of 1954 and section 1.274-5 of the Income Tax Regulations.

SEC. 2. BACKGROUND.

Section 274(d) of the Code and section 1.274-5 of the regulations provide new rules for the substantiation of business expenditures for travel, entertainment and gifts. These provisions are applicable to taxable years ending after December 31, 1962, but only in respect of periods after that date.

SEC. 3. CONCLUSION.

In order to facilitate compliance with the provisions of section 274(d) of the Code and section 1.274-5 of the regulations, and to assist businessmen who encounter mechanical difficulties in accommodating their present record keeping systems for expense accounts to the requirements of those provisions-

.01 The 31-day period, from January 1 through January 31, 1963, will be considered a period for acquiring familiarity with the provisions of section 1.274-5 of the regulations. For expenses incurred during such 31-day period, examining agents have been instructed to allow reasonable tolerances in applying the provisions of section 274(d) of the Code and 1.274-5 of the regulations in the cases of taxpayers who make good-faith effort to comply with the new rules as rapidly as possible.

.02 Taxpayers who establish that there accounting systems substantially conform to the requirements of Revenue Ruling 60-120, C.B. 1960-1, 83, and who also establish that they have made good-faith effort to comply, as expeditiously as practicable, with the provisions of section 274(d) of the Code and section 1.274-5 of the regulations, will be allowed up to 90 days (from January 1, 1963, through March 31, 1963) in which to conform their accounting systems and procedures to the statute and the regulations.

¹ Based on Technical Information Release 436. dated Dec. 27, 1962: Modified by rev. Proc. 63-18, page 506.