Assignment Prompt & Instructions
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– ## Tax6045FinalWritingAssignmentOverview.docx
**## Tax6045FinalWritingAssignmentOverview.docx**
Tax 6045
Final Writing Assignment Spring 2026
Due April 22
**_Change in Accounting Method Request_**
Based on a specific set of facts, you will be required to put together the paperwork necessary to file the forms necessary to request a change in accounting method including any correspondence required by Revenue Procedures issued by the IRS covering the change in accounting method.
We will be working on this together as part of our class time.
Taxpayer represents that the facts are as follows:
Taxpayer, Misguided Missile, Inc., a Florida corporation is taxed as an S corporation for Federal income tax purposes and you have copies of the originally filled Form 2553 and SS-4 electing S status, in additional to all filed returns. The Taxpayer files a Form 1120S, on a calendar-year basis and uses an overall accrual method of accounting for Federal income tax purposes.
Your Firm, Dewey, Cheatem and Howe, an outside CPA and tax consulting firm, has been preparing Taxpayer's Federal Form 1120S and supporting forms and information for income tax return since 2010. There are no open audits or inquiries with the IRS or Florida Department of Revenue.
Following a discussion with your client regarding your client’s methods of depreciation in light of the changes under OBBBA of 2025 and a review of IRS Pub. 538, Rev. Proc. 2015-13 and other materials, you have decided to File Form 3115 to request a change in accounting method.
The change in accounting method deals with the Taxpayer's depreciation method and class life of certain assets under the automatic change procedures of section 6.01(1) of Rev. Proc. 2015-13 for the change described in section 6.01 Rev. Proc. 2022-14, 2022-7 I.R.B. 502, 515 (
**designated automatic accounting method change number (DCN) 7).** (You need to check if these Rev Procs have been superseded.)
**_We will assume this problem requires following DCN 7_**
You have advised your client that your client will need to make a §481(a) adjustment on the Form 1120S for the current to reflect the effects of the change in accounting method.
**_Facts for consideration:_**
In reviewing the return for 2024 you discovered that all of the furniture purchased in 2021 have been depreciated using the MACRS (5 yr, 200% DB, half year convention) instead of the required 7 yr convention. Assume the furniture was purchased as a single block on March 1, 2021 and immediately placed in service. The Cost of the furniture was $400,000.
According to the tax books for the client the total depreciation taken through December 31, 2024 was as follows:
**Present method (5-year):**
· 2021: 20.00% × 400,000 =
**80,000**
· 2022: 32.00% × 400,000 =
**128,000**
· 2023: 19.20% × 400,000 =
**76,800**
· 2024: 11.52% × 400,000 =
**46,080**
·
**Total MACRS Depreciation taken:** $
**330,880**
As part of this exercise you will need to calculate the correct 7 year depreciation amounts and calculate the §481(a) adjustment. In accordance with Rev Proc 2015-13 you will need determine how to adjust future earnings as a result of the change.
**Deliverables:**
1.
**Transmittal Letter**
Partial Example of Contents of letter
**Re: Automatic accounting method change—depreciation**
Taxpayer, an S corporation, requests consent to change its method of accounting for depreciation for the assets identified in the attached schedules. The requested change is made under
**Rev. Proc. 2025-23**, section
**6.01** (DCN 7), or section
**6.07** (DCN 107), as applicable. The taxpayer’s present method is impermissible because the affected assets were depreciated using an incorrect recovery period, bonus treatment, or other depreciation method. The proposed method is the permissible method under
**§ 168** and the applicable asset classification authorities. The taxpayer has computed the
**§ 481(a) adjustment** as the difference between depreciation taken and depreciation allowable for all open and closed years preceding the year of change, consistent with Rev. Proc. 2025-23 section 6.01(5). For disposed property, the taxpayer has also included the required collateral adjustments to current-year depreciation and gain or loss on disposition, consistent with section 6.07.
2.
**Form 3115**– You will need to fill out at a minimum (1) Page 1,part , (2) Part IV, (3) Schedule E, (4) A supporting statement discussing the proposed changes (See, in part, Rev Proc 2025-23 Section 6.01
3.
**Form 3115 Package**
A.
**Form 3115 itself**
For automatic changes, attach the
**original** to the timely filed federal return for the year of change and file a
**signed duplicate** with the IRS in Ogden no earlier than the first day of the year of change and no later than the date the original is filed. If the taxpayer is under exam, an additional copy goes to the examining agent, Appeals, or government counsel as applicable.
**B. Schedule E attachments required by the form**
Form 3115 Schedule E requires, for each item or class of property:
· property description, type, placed-in-service year, and use in the trade or business;
· any federal tax credit or grant and related basis adjustments;
· description of how the property is treated under the present method;
· if moving to depreciable status, facts supporting depreciation treatment;
· for present and proposed methods: Code section, asset class, support for the asset class, method, recovery period, convention, and bonus-depreciation treatment.
**C. Additional statements specifically required by Rev. Proc. 2025-23 section 6.01**
For DCN 7, attach:
· a
**detailed description** of the present and proposed methods; a vague statement like “MACRS to MACRS” is expressly not enough;
· a statement describing the taxpayer’s business or income-producing activity;
· a statement of the facts and law supporting the proposed method, property classification, and asset class.
**D. Depreciation workpapers**
Attach or keep ready:
· fixed-asset ledger for each affected asset;
· original cost and basis schedule;
· placed-in-service documentation;
· prior depreciation schedules as filed;
· recomputed depreciation under the proposed method by year;
· a rollforward showing
**“taken vs. allowable”** and the resulting § 481(a).
This is not just good practice; it is the cleanest way to substantiate the section 6.01 computation rule.
**E . Special disposed-property support for DCN 107**
Add:
· sale/retirement documents,
· gain-or-loss recomputation schedule,
· current-year depreciation recomputation,
· collateral-adjustment schedule showing the year-of-change tax effect.
That is required because section 6.07 expressly calls for year-of-change collateral adjustments.
4.
**supporting-document index**
**Tab 1 — Cover memo**
· taxpayer name, EIN, year of change
· requested automatic change number
· summary of present and proposed methods
· requested § 481(a) adjustment
**Tab 2 — Eligibility memo**
· cites § 446(e), Reg. § 1.446-1(e)(2)(ii)(d)
· cites Rev. Proc. 2025-23 section 6.01 or 6.07
· states asset was on at least two consecutively filed returns if DCN 7 applies
· confirms automatic-change eligibility and whether any 5-year prior-item limitations are inapplicable
**Tab 3 — Fixed-asset detail**
· asset ID
· description
· cost
· placed-in-service date
· current class life/recovery period/method/convention
· proposed class life/recovery period/method/convention
**Tab 4 — Present depreciation schedule**
· annual depreciation as actually claimed
**Tab 5 — Proposed depreciation schedule**
· annual depreciation as allowable
**Tab 6 — § 481(a) schedule**
· cumulative claimed through beginning of year of change
· cumulative allowable through beginning of year of change
· difference = § 481(a)
· if positive, spread schedule under Rev. Proc. 2015-13
· if disposed property, note full inclusion and show collateral adjustments
**Tab 7 — Legal support**
· asset-class analysis
· bonus eligibility analysis, if applicable
· any ADS/GDS justification
· any basis-adjustment explanation
**Tab 8 — Disposition materials** (if DCN 107)
· bill of sale
· Form 4797 tie-out
· recomputed recapture/gain workpaper
**## Tax6045FinalWritingAssignmentOverview.docx**
Tax 6045
Final Writing Assignment Spring 2026
Due April 22
**_Change in Accounting Method Request_**
Based on a specific set of facts, you will be required to put together the paperwork necessary to file the forms necessary to request a change in accounting method including any correspondence required by Revenue Procedures issued by the IRS covering the change in accounting method.
We will be working on this together as part of our class time.
Taxpayer represents that the facts are as follows:
Taxpayer, Misguided Missile, Inc., a Florida corporation is taxed as an S corporation for Federal income tax purposes and you have copies of the originally filled Form 2553 and SS-4 electing S status, in additional to all filed returns. The Taxpayer files a Form 1120S, on a calendar-year basis and uses an overall accrual method of accounting for Federal income tax purposes.
Your Firm, Dewey, Cheatem and Howe, an outside CPA and tax consulting firm, has been preparing Taxpayer's Federal Form 1120S and supporting forms and information for income tax return since 2010. There are no open audits or inquiries with the IRS or Florida Department of Revenue.
Following a discussion with your client regarding your client’s methods of depreciation in light of the changes under OBBBA of 2025 and a review of IRS Pub. 538, Rev. Proc. 2015-13 and other materials, you have decided to File Form 3115 to request a change in accounting method.
The change in accounting method deals with the Taxpayer's depreciation method and class life of certain assets under the automatic change procedures of section 6.01(1) of Rev. Proc. 2015-13 for the change described in section 6.01 Rev. Proc. 2022-14, 2022-7 I.R.B. 502, 515 (
**designated automatic accounting method change number (DCN) 7).** (You need to check if these Rev Procs have been superseded.)
**_We will assume this problem requires following DCN 7_**
You have advised your client that your client will need to make a §481(a) adjustment on the Form 1120S for the current to reflect the effects of the change in accounting method.
**_Facts for consideration:_**
In reviewing the return for 2024 you discovered that all of the furniture purchased in 2021 have been depreciated using the MACRS (5 yr, 200% DB, half year convention) instead of the required 7 yr convention. Assume the furniture was purchased as a single block on March 1, 2021 and immediately placed in service. The Cost of the furniture was $400,000.
According to the tax books for the client the total depreciation taken through December 31, 2024 was as follows:
**Present method (5-year):**
· 2021: 20.00% × 400,000 =
**80,000**
· 2022: 32.00% × 400,000 =
**128,000**
· 2023: 19.20% × 400,000 =
**76,800**
· 2024: 11.52% × 400,000 =
**46,080**
·
**Total MACRS Depreciation taken:** $
**330,880**
As part of this exercise you will need to calculate the correct 7 year depreciation amounts and calculate the §481(a) adjustment. In accordance with Rev Proc 2015-13 you will need determine how to adjust future earnings as a result of the change.
**Deliverables:**
1.
**Transmittal Letter**
Partial Example of Contents of letter
**Re: Automatic accounting method change—depreciation**
Taxpayer, an S corporation, requests consent to change its method of accounting for depreciation for the assets identified in the attached schedules. The requested change is made under
**Rev. Proc. 2025-23**, section
**6.01** (DCN 7), or section
**6.07** (DCN 107), as applicable. The taxpayer’s present method is impermissible because the affected assets were depreciated using an incorrect recovery period, bonus treatment, or other depreciation method. The proposed method is the permissible method under
**§ 168** and the applicable asset classification authorities. The taxpayer has computed the
**§ 481(a) adjustment** as the difference between depreciation taken and depreciation allowable for all open and closed years preceding the year of change, consistent with Rev. Proc. 2025-23 section 6.01(5). For disposed property, the taxpayer has also included the required collateral adjustments to current-year depreciation and gain or loss on disposition, consistent with section 6.07.
2.
**Form 3115**– You will need to fill out at a minimum (1) Page 1,part , (2) Part IV, (3) Schedule E, (4) A supporting statement discussing the proposed changes (See, in part, Rev Proc 2025-23 Section 6.01
3.
**Form 3115 Package**
A.
**Form 3115 itself**
For automatic changes, attach the
**original** to the timely filed federal return for the year of change and file a
**signed duplicate** with the IRS in Ogden no earlier than the first day of the year of change and no later than the date the original is filed. If the taxpayer is under exam, an additional copy goes to the examining agent, Appeals, or government counsel as applicable.
**B. Schedule E attachments required by the form**
Form 3115 Schedule E requires, for each item or class of property:
· property description, type, placed-in-service year, and use in the trade or business;
· any federal tax credit or grant and related basis adjustments;
· description of how the property is treated under the present method;
· if moving to depreciable status, facts supporting depreciation treatment;
· for present and proposed methods: Code section, asset class, support for the asset class, method, recovery period, convention, and bonus-depreciation treatment.
**C. Additional statements specifically required by Rev. Proc. 2025-23 section 6.01**
For DCN 7, attach:
· a
**detailed description** of the present and proposed methods; a vague statement like “MACRS to MACRS” is expressly not enough;
· a statement describing the taxpayer’s business or income-producing activity;
· a statement of the facts and law supporting the proposed method, property classification, and asset class.
**D. Depreciation workpapers**
Attach or keep ready:
· fixed-asset ledger for each affected asset;
· original cost and basis schedule;
· placed-in-service documentation;
· prior depreciation schedules as filed;
· recomputed depreciation under the proposed method by year;
· a rollforward showing
**“taken vs. allowable”** and the resulting § 481(a).
This is not just good practice; it is the cleanest way to substantiate the section 6.01 computation rule.
**E . Special disposed-property support for DCN 107**
Add:
· sale/retirement documents,
· gain-or-loss recomputation schedule,
· current-year depreciation recomputation,
· collateral-adjustment schedule showing the year-of-change tax effect.
That is required because section 6.07 expressly calls for year-of-change collateral adjustments.
4.
**supporting-document index**
**Tab 1 — Cover memo**
· taxpayer name, EIN, year of change
· requested automatic change number
· summary of present and proposed methods
· requested § 481(a) adjustment
**Tab 2 — Eligibility memo**
· cites § 446(e), Reg. § 1.446-1(e)(2)(ii)(d)
· cites Rev. Proc. 2025-23 section 6.01 or 6.07
· states asset was on at least two consecutively filed returns if DCN 7 applies
· confirms automatic-change eligibility and whether any 5-year prior-item limitations are inapplicable
**Tab 3 — Fixed-asset detail**
· asset ID
· description
· cost
· placed-in-service date
· current class life/recovery period/method/convention
· proposed class life/recovery period/method/convention
**Tab 4 — Present depreciation schedule**
· annual depreciation as actually claimed
**Tab 5 — Proposed depreciation schedule**
· annual depreciation as allowable
**Tab 6 — § 481(a) schedule**
· cumulative claimed through beginning of year of change
· cumulative allowable through beginning of year of change
· difference = § 481(a)
· if positive, spread schedule under Rev. Proc. 2015-13
· if disposed property, note full inclusion and show collateral adjustments
**Tab 7 — Legal support**
· asset-class analysis
· bonus eligibility analysis, if applicable
· any ADS/GDS justification
· any basis-adjustment explanation
**Tab 8 — Disposition materials** (if DCN 107)
· bill of sale
· Form 4797 tie-out
· recomputed recapture/gain workpaper