Rev. Rul. 71-20

Advice has been requested whether punched cards, magnetic tapes, disks, and other machine-sensible data media used in the automatic data processing of accounting transactions constitute records within the meaning of section 6001 of the Internal Revenue Code of 1954 and section 1.6001-1 of the Income Tax Regulations.

In the typical situation the taxpayer maintains records within his automatic data processing (ADP) system. Daily transactions are recorded on punched cards and processed by the taxpayer's computer which prints daily listings and accumulates the individual transaction records for a month's business on magnetic tapes. At the month's end the tapes are used to print out monthly journals, registers, and subsidiary ledgers and to prepare account summary totals entered on punched cards. The summary data from these cards is posted to the general ledger and a monthly printout is generated to reflect opening balances, summary total postings, and closing balances. At the year's end several closing ledger runs are made to record adjusting entries. In other situations taxpayers use punched cards, disks, or other machine-sensible data media to store accounting information.

Section 6001 of the Code provides that every person liable for any tax imposed by the Code, or for the collection thereof, shall keep such records as the Secretary of the Treasury or his delegate may from time to time prescribe.

Section 1.6001-1(a) of the Income Tax Regulations provides that any person subject to income tax shall keep such permanent books of account of records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown by such person in any return of such tax.

Section 1.6001-1(e) of the regulations provides that the books and records required by this section shall be retained so long as the contents thereof may become material in the administration of any internal revenue law.

It is held that punched cards, magnetic tapes, disks, and other machine-sensible data media used for recording, consolidating, and summarizing accounting transactions and records within a taxpayer's automatic data processing system are records within the meaning of section 6001 of the Code and section 1.6001-1 of the regulations and are required to be retained so long as the contents may become material in the administration of any internal revenue law. However, where punched cards are used merely as a means of input to the system and the information is duplicated on magnetic tapes, disks, or other machine-sensible records, such punched cards need not be retained.

It is recognized that ADP accounting systems will vary from taxpayer to taxpayer and, usually, will be designed to fit the specific needs of the taxpayer. Accordingly, taxpayers who are in doubt as to which records are to be retained or who desire further information should contact their District Director for assistance.

See Revenue Procedure 64-12, C.B. 1964-1 (Part 1), 672, which sets forth guidelines for keeping records within an ADP system.

¹ Also released as Technical Information Release 1062, dated December 31, 1970.