Rev. Proc. 74-35

Section 1. Purpose.

The purpose of this Revenue Procedure is to set forth in a convenient checklist questionnaire the information necessary to be included in a request under section 1.1502-13(c)(3) of the Income Tax Regulations, which relates to an election with the consent of the Commissioner of Internal Revenue not to defer gain or loss on any deferred intercompany transactions during consolidated return years with respect to all property or any class or classes of property.

Sec. 2. Background.

.01 The Internal Revenue Service receives requests for consent to an election not to defer gain or loss on deferred intercompany transactions during consolidated return years in which the information furnished is not complete enough to justify approval of the election. In such cases it is necessary to secure additional facts from the taxpayer before the request can be considered. This procedure is time consuming for both Service personnel and taxpayers and delays issuance of the response to the request. This checklist will facilitate the filing and handling of requests under section 1.1502-13(c)(3) of the regulations by specifying the information that should be included so that the application will be as complete as possible when originally filed. However, since the information necessary to rule on a particular case depends upon all the facts and circumstances, information in addition to that listed in this Revenue Procedure may be required. Nevertheless, careful use of the checklist should avoid much needless delay and permit the issuance of approvals or denials in the most expeditious fashion possible.

.02 The authority and general procedures of the National Office of the Internal Revenue Service with respect to the issuance of advance rulings are outlined in Rev. Proc. 72-3, 1972-1 C.B. 698, and are applicable to requests under section 1.1502-13(c)(3) of the regulations.

Sec. 3. Information to be Included in Request for Rulings Under Section 1.1502-13(c)(3) of the Regulations.

.01 Each of the items included in this Section should be specifically dealt with in the application. If an item is not applicable, the letters "N.A." may be inserted after that item to so indicate.

Presentation of the information should follow the format of this Revenue Procedure as closely as possible.

.02 Information needed in order to make determination:

1. The date the affiliated group elected to file consolidated returns.

2. A comparison of consolidated taxable income with deferred intercompany gains or losses and without deferred intercompany gains or losses for the first taxable year for which the election would apply.

3. An analysis of the effect of not deferring intercompany gain or loss on the following items for the first taxable year to which the election would apply:

(a) Net operating loss carryovers.

(b) Capital loss carryovers.

(c) Investment and foreign tax credits in the current year as well as carryovers to the current year.

(d) Western Hemisphere trade corporation deduction.

With respect to any carryovers referred to in item (a) through (c) above, the analysis should include amounts for each of the carryover years and the date of expiration of the losses or credits.

4. A statement as to whether any sales of property between members of the group that would be depreciable or depletable property in the hands of the purchasing member would result in long-term capital gain to the seller member, taking into account the provisions of sections 1245 and 1250 of the Internal Revenue Code of 1954 relating to gain from dispositions of certain depreciable property or certain depreciable realty.

5. A statement indicating which members of the group are Western Hemisphere trade corporations as defined in section 921 of the Code, and whether the non-deferral of intercompany transactions would affect any member's status under sections 921 or 931.

6. A statement as to whether any of the members involved in the deferred intercompany transactions are subject to the separate returns limitation year rules or the consolidated return change of ownership rules.

7. A statement as to the type or types of property involved in the election.

8. A complete statement as to the reasons why the election is being made and why the group believes it should not be required to defer gain or loss on deferred intercompany transactions.

Sec. 4. Inquiries.

Inquiries in regard to this Revenue Procedure should refer to its number and should be addressed to the Commissioner of Internal Revenue, Attention T:I:C, Internal Revenue Service, Washington, D.C. 20224.