Rev. Proc. 65-32

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to provide an example in order to illustrate the method of computation of taxable income for the year of transition of a taxpayer who has been granted permission to change an accounting practice, for Federal income tax purposes, in accordance with Revenue Procedure 64-16, C.B. 1964-1 (Part 1), 677, under the circumstances indicated, so as to provide guidance as to the information that should be submitted in requesting permission to make such changes.

SEC. 2. EXAMPLE.

The taxpayer has heretofore omitted overhead from the computation of inventories and desires to correct this practice. The year of transition is the taxable year ending December 31, 1964. The amount of closing inventory shown on the income tax return for the taxable year ended December 31, 1963, was $365,000. The amount of overhead omitted from that inventory was $45,000, which the taxpayer has agreed to take into account ratably over a 10-year period commencing with the taxable year ending December 31, 1964. The amount of the inventory as of December 31, 1964, is $335,000, inclusive of overhead of $40,000. The taxable income for the taxable year ended December 31, 1964, based on the foregoing and the amounts indicated below, should be computed as follows:

 Sales................................................ $800,000

SEC. 3. EFFECT ON OTHER DOCUMENTS.

This Revenue Procedure amplifies Revenue Procedure 64-16, C.B. 1964-1 (Part 1), 677.