Reference no: EM134005392

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.  No AI shortcuts — Get authentic assignment help from qualified, real tutors. 
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 (You need to check if these Rev Procs have been superseded.)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.