[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 615-617]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.9002  Statutory provisions; Dealer Reserve Income Adjustment 
Act of 1960 (74 Stat. 124).

    Section 1. Short title. This Act may be cited as the ``Dealer 
Reserve Income Adjustment Act of 1960''.
    Sec. 2. Persons to whom this Act applies. This Act shall apply to 
any person who, for his most recent taxable year ending on or before 
June 22, 1959:
    (1) Computed, or was required to compute, taxable income under an 
accrual method of accounting.
    (2) Treated any dealer reserve income, which should have been taken 
into account (under the accrual method of accounting) for such taxable 
year, as accruable for a subsequent taxable year, and
    (3) Before September 1, 1960, makes an election under section 3(a) 
or 4(a) of this Act.
    Sec. 3. Election to have section 481 apply--(a) General rule. If:
    (1) For the year of the change (determined under subsection (b)), 
the treatment of dealer reserve income by any person to whom this Act 
applies is changed to a method proper under the accrual method of 
accounting (whether or not such person initiated the change),
    (2) Such person makes an election under this subsection, and
    (3) Such person does not make the election provided by section 4(a),

then, for purposes of section 481 of the Internal Revenue Code of 1954, 
the change described in paragraph (1) shall be treated as a change in 
method of accounting not initiated by the taxpayer.
    (b) Year of change, etc. In applying section 481 of the Internal 
Revenue Code of 1954 for purposes of this section, the ``year of the 
change'' in the case of any person is:
    (1) Except as provided in paragraph (2), the first taxable year 
ending after June 22, 1959, or
    (2) The earliest taxable year (whether the Internal Revenue Code of 
1954 or the Internal Revenue Code of 1939 applies to such year) for 
which:
    (A) On or before June 22, 1959:
    (i) The Secretary of the Treasury or his delegate issued a notice of 
deficiency, or a written notice of a proposed deficiency, with respect 
to dealer reserve income, or
    (ii) Such person filed with the Secretary or his delegate a claim 
for refund or credit with respect to dealer reserve income, and
    (B) The assessment of any deficiency, or the refund or credit of any 
overpayment, whichever is applicable, was not, on June 21, 1959, 
prevented by the operation of any law or rule of law.


[[Page 616]]


For purposes of this section, section 481 of such Code shall be treated 
as applying to any year of the change to which the Internal Revenue Code 
of 1939 applies.
    Sec. 4. Election to have section 481 not apply; payment in 
installments--(a) General rule. If a person to whom this Act applies 
makes an election under this subsection, then for purposes of Chapter 1 
of the Internal Revenue Code of 1954 (and the corresponding provisions 
of prior law) a change in the treatment of dealer reserve income to a 
method proper under the accrual method of accounting shall be treated as 
not a change in method of accounting in respect of which section 481 of 
the Internal Revenue Code of 1954 applies. Any election under this 
subsection shall apply to all taxable years ending on or before June 22, 
1959 (whether the provisions of the Internal Revenue Code of 1954 or the 
corresponding provisions of prior law apply), for which the assessment 
of any deficiency, or for which refund or credit of any overpayment, 
whichever is applicable, was not, on June 21, 1959, prevented by the 
operation of any law or rule of law.
    (b) Election to pay tax in installments--(1) Eligibility. If the net 
increase in tax (as defined in paragraph (2)) which results solely from 
the effect of the election provided by subsection (a) exceeds $2,500, 
then the taxpayer may elect (at the time the election is made under 
subsection (a)) to pay in two or more (but not to exceed 10) equal 
annual installments any portion of such net increase which (on the date 
of such election) is unpaid.
    (2) Net increase in tax defined. For purposes of this section, the 
term ``net increase in tax'' means the amount (if any) by which:
    (A) The sum of the increases in tax (including interest) for all 
taxable years to which the election applies and which is attributable to 
the election, exceeds
    (B) The sum of the decreases in tax (including interest) for all 
taxable years to which the election applies and which is attributable to 
the election.

For purposes of this paragraph, interest for the period before the date 
of the election shall be computed as provided in Chapter 67 of the 
Internal Revenue Code of 1954 (or the corresponding provisions of prior 
revenue laws).
    (c) Due date for installments. If an election is made under 
subsection (b), the first installment shall be paid on or before the 
date prescribed by section 6151(a) of the Internal Revenue Code of 1954 
for payment of the tax for the taxable year in which the election was 
made, and each succeeding installment shall be paid on or before the 
date which is one year after the date prescribed by this subsection for 
payment of the preceding installment.
    (d) Effect of subsequent redetermination of tax--(1) 
Redetermination. If:
    (A) The taxpayer makes an election under subsection (b), and
    (B) There is a redetermination of the taxpayer's tax for any taxable 
year to which the election provided by subsection (a) applies,

then the net increase in tax (as defined in subsection (b)(2) shall be 
redetermined.
    (2) Effect of increase. If the redetermination described in 
paragraph (1)(B) results in an increase in the net increase in tax (as 
defined in subsection (b)(2)), the resulting increase shall be prorated 
to ull the installments. The part of such resulting increase so prorated 
to any installment the date for payment of which has not arrived shall 
be collected at the same time as, and as a part of, such installment. 
The part of such resulting increase so prorated to any installment the 
date for payment of which has arrived shall be paid upon notice and 
demand from the Secretary of the Treasury or his delegate.
    (3) Effect of decrease. For treatment of a decrease in the net 
increase in tax as the result of a redetermination described in 
paragraph (1)(B), see section 6403 of the Internal Revenue Code of 1954 
(relating to overpayment of installment).
    (e) Suspension of interest--(1) In general. If an election under 
subsection (a) applies and there is a net increase in tax (as defined in 
subsection (b)(2)), no interest shall be imposed on any underpayment 
(and no interest shall be paid on any overpayment) attributable to such 
election for the period beginning on the date of such election and 
ending on the date prescribed by section 6151(a) of the Internal Revenue 
Code of 1954 for payment of the tax for the taxable year in which the 
election was made.
    (2) No interest during installment period. If an election under 
subsection (b) applies, no interest shall be imposed for the period on 
or after the date fixed for payment of the first installment unless 
payment of unpaid installments is accelerated under subsection (f) or 
(g).
    (3) Interest where payment is accelerated. If payment is accelerated 
under subsection (f) or (g), interest determined in accordance with the 
provisions of section 6601 of the Internal Revenue Code of 1954 on the 
entire unpaid tax shall be payable:
    (A) If payment is accelerated under subsection (f), from the date of 
notice and demand provided by such subsection to the date such tax is 
paid, or
    (B) If payment is accelerated under subsection (g), from the date 
fixed for paying the unpaid installment to the date such tax is paid.
    (f) Termination of installment payment privilege. The extension of 
time provided by this section for payment of tax shall cease to apply, 
and any unpaid installments shall be paid upon notice and demand from 
the Secretary of the Treasury or his delegate, if:

[[Page 617]]

    (1) In the case of a taxpayer who is an individual, he dies or 
ceases to engage in a trade or business,
    (2) In the case of a taxpayer who is a partner, the entire interest 
of such partner is transferred or liquidated or the partnership 
terminates, or
    (3) In the case of a taxpayer which is a corporation, the taxpayer 
ceases to engage in a trade or business, unless the unpaid portion of 
the tax payable in installments is required to be taken into account by 
the acquiring corporation under section 5(d).
    (g) Failure to pay installment. If any installment under this 
section is not paid on or before the date fixed for its payment by this 
section (including any extension of time for payment of such 
installment), the unpaid installments shall be paid upon notice and 
demand from the Secretary of the Treasury or his delegate.
    (h) Suspension of running of periods of limitation. The running of 
the periods of limitation provided by section 6502 of the Internal 
Revenue Code of 1954 (or corresponding provision of prior law) for the 
collection of any amount of tax payable in installments under this 
section shall be suspended for the period of any extension of time for 
payment granted under this section.
    Sec. 5. Definitions; special rules--(a) Dealer reserve income. For 
purposes of this Act, the term ``dealer reserve income'' means:
    (1) That part of the consideration derived by any person from the 
sale or other disposition of customers' sales contracts, notes, and 
other evidences of indebtedness (or derived from customers' finance 
charges connected with such sales or other dispositions) which is:
    (A) Attributable to the sale by such person to such customers, in 
the ordinary course of his trade or business, of real property or 
tangible personal property, and
    (B) Held in a reserve account, by the financial institution to which 
such person disposed of such evidences of indebtedness, for the purpose 
of securing obligations of such person or of such customers, or both; 
and
    (2) That part of the consideration:
    (A) Derived by any person from a sale described in paragraph (1)(A) 
in respect of which part or all of the purchase price of the property 
sold is provided by a financial institution to or for the customer to 
whom such property is sold, or
    (B) Derived by such person from finance charges connected with the 
financing of such sale,

which is held in a reserve account by such financial institution for the 
purpose of securing obligations of such person or of such customer, or 
both.
    (b) Financial institution. For purposes of this Act, the term 
``financial institution'' means any person regularly engaged in the 
business of acquiring evidences of indebtedness of the kind described in 
subsection (a)(1), or of financing sales of the kind described in 
subsection (a)(2), or both.
    (c) Other terms; application of other laws. Except where otherwise 
distinctly expressed or manifestly intended, terms used in this Act 
shall have the same meaning as when used in the Internal Revenue Code of 
1954 and all provisions of law shall apply with respect to this Act as 
if this Act were a part of such Code.
    (d) Acquiring corporation. In the case of the acquisition of assets 
of a corporation by another corporation in a distribution or transfer 
described in section 381(a) of the Internal Revenue Code of 1954, the 
acquiring corporation shall, for purposes of this Act, be treated as if 
it were the distributor or transferor corporation.
    (e) Statutes of limitations--(1) Extension of period for assessment 
and refund or credit. For purposes of applying sections 3 and 4 of this 
Act, if the assessment of any deficiency, or the refund or credit of any 
overpayment, for any taxable year was not prevented on June 21, 1959, by 
the operation of any law or rule of law, but would be so prevented prior 
to September 1, 1961, the period within which such assessment, or such 
refund or credit, may be made shall not expire prior to September 1, 
1961. An election by a taxpayer under section 3 or 4 of this Act shall 
be considered as a consent to the application of the provisions of this 
subsection.
    (2) Years closed by closing agreement or compromise. For purposes of 
this Act, if the assessment of any deficiency, or the refund or credit 
of any overpayment, for any taxable year is prevented on the date of an 
election under section 3 or 4 of this Act by the operation of the 
provisions of Chapter 74 of the Internal Revenue Code of 1954 (relating 
to closing agreements and compromises) or by the corresponding 
provisions of the Internal Revenue Code of 1939, such assessment, or 
such refund or credit, shall be considered as having been prevented on 
June 21, 1959.
    (f) Regulations. The Secretary of the Treasury or his delegate shall 
prescribe such regulations as may be necessary to carry out the purposes 
of this Act, including regulations relating to:
    (1) The application of the provisions of this Act in the case of 
partnerships, and
    (2) The manner in which the elections provided by this Act are to be 
made.

[T.D. 6490, 25 FR 8369, Sept. 1, 1960]