Tax Rules: Final: 5703-5
5703-5-04 - Changes of a taxpayer's
annual accounting period
(A) This rule prescribes the modifications to rule 5703-5-03
of the Administrative Code required to accommodate a change
of a taxpayer's annual accounting period. As used in this
rule, a change of a taxpayer’s annual accounting period
involves a change in the year-end of that accounting period.
If, as the result of a change of ownership, a taxpayer has
two short-period federal taxable years because of the
taxpayer’s inclusion in one or more consolidated federal
income tax returns, and if the year-end of the taxpayer’s
annual accounting period remains the same after the change of
ownership as it was before the change, then there is no
change of the taxpayer’s annual accounting period for
purposes of this rule. Rule 5703-5-01 of the Administrative
Code defines terms used in this rule.
(B) Rule 5703-5-03 of the Administrative Code prescribes the
dates on which a taxpayer's taxable year begins and ends.
Unless the taxpayer is a new taxpayer, the taxable year
begins on the date immediately following the end of the
taxpayer's prior taxable year and ends on the date
immediately preceding the beginning of the taxpayer's annual
accounting period that includes the first day of January of
the tax year.
The taxpayer's annual accounting period is used for the
taxpayer's computation of income for book purposes. It is
ordinarily a period of one year in duration (three hundred
sixty-five days, or three hundred sixty-six days if the
period includes the twenty-ninth day of February), although
it may vary between fifty-two and fifty-three weeks in
length.
Since the taxable year ends on the date immediately preceding
the beginning of the taxpayer's annual accounting period, the
taxable year also generally consists of a period of one year.
However, as the result of a change of a taxpayer's annual
accounting period, the period prescribed in rule 5703-5-03 of
the Administrative Code may be less than or more than one
year. Furthermore, if the change occurs because of a change
in ownership, the period prescribed in rule 5703-5-03 of the
Administrative Code may be difficult to determine or
inappropriate to use. Therefore, in the case of a change in
the taxpayer's annual accounting period, the following shall
apply:
(1) If the taxpayer changes its annual accounting period and
the change is not in conjunction with a change of ownership,
the period prescribed in rule 5703-5-03 of the Administrative
Code shall be the taxable year.
(2) If the taxpayer changes its annual accounting period from
one year-end (the "old year-end") to another year-end (the
"new year-end") in conjunction with a change in ownership
during the calendar year immediately preceding the tax year,
the tax year shall be based on a taxable year that ends on
the following date in lieu of the date specified in paragraph
(C)(1) of rule 5703-5-03 of the Administrative Code:
(a) If the taxpayer's old year-end was on or before the date
of acquisition, the old year-end shall be the ending date.
(b) If paragraph (B)(2)(a) of this rule does not apply and
the taxpayer's new year-end is on or after the date of
acquisition, the new year-end shall be the ending date.
(c) If neither paragraph (B)(2)(a) nor (B)(2)(b) of this rule
applies, the date of acquisition shall be the ending date.
(d) For purposes of determining the sequence of dates
specified in paragraph (B)(2) of this rule, the old year-end
and the new year-end are dates ending in the same calendar
year as the date of acquisition.
(C) The following examples illustrate the application of this
rule:
(1) For tax year 2004, CORP-H had a taxable year that ended
on September 30, 2003. Between September 30, 2003 and June
30, 2004, CORP-H changed the year-end of its annual
accounting period from September thirtieth to June thirtieth.
CORP-H's annual accounting period that includes January 1,
2005 begins on July 1, 2004. For tax year 2005, CORP-H's
taxable year begins on October 1, 2003 and ends on June 30,
2004 in accordance with paragraph (B)(1) of this rule.
(2) For tax year 2004, CORP-I had a taxable year that ended
on June 30, 2003. Between June 30, 2004 and September 30,
2004, CORP-I changed the year-end of its annual accounting
period from June thirtieth to September thirtieth.
CORP-I's annual accounting period that includes January 1,
2005 begins on October 1, 2004. For tax year 2005, CORP-I's
taxable year begins on July 1, 2003 and ends on September 30,
2004 in accordance with paragraph (B)(1) of this rule.
(3) CORP-J was a wholly owned subsidiary of OLDPARENT, and
each had an April thirtieth fiscal year-end. As the result of
a sale on July 31, 2004, CORP-J becomes a wholly owned
subsidiary of NEWPARENT, who has an November thirtieth fiscal
year-end. Accordingly, CORP-J adopts a November thirtieth
year-end for its annual accounting period.
CORP-J was included in consolidated federal returns with
OLDPARENT for the periods May 1, 2002 to April 30, 2003, May
1, 2003 to April 30, 2004 and May 1, 2004 to July 31, 2004,
and is included in consolidated federal returns with
NEWPARENT for the periods August 1, 2004 to November 30,
2004, December 1, 2004 to November 30, 2005 and December 1,
2005 to November 30, 2006.
For tax year 2004, CORP-J had a taxable year that ended on
April 30, 2003. For tax year 2005, CORP-J's taxable year
begins on May 1, 2003; it ends on April 30, 2004 in
accordance with paragraph (B)(2)(a) of this rule. For tax
year 2006, CORP-J's taxable year begins on May 1, 2004 and
ends on November 30, 2005. For tax year 2007, CORP-J's
taxable year begins on December 1, 2005 and ends on November
30, 2006.
(4) CORP-K was a wholly owned subsidiary of OLDOWNER, and
each had an April thirtieth fiscal year-end. As the result of
a sale on January 31, 2004, CORP-K becomes a wholly owned
subsidiary of NEWOWNER, who has a November thirtieth fiscal
year-end. Accordingly, CORP-K adopts a November thirtieth
year-end for its annual accounting period.
CORP-K was included in consolidated federal returns with
OLDOWNER for the periods May 1, 2002 to April 30, 2003 and
May 1, 2003 to January 31, 2004, and is included in
consolidated federal returns with NEWOWNER for the periods
February 1, 2004 to November 30, 2004 and December 1, 2004 to
November 30, 2005.
For tax year 2004, CORP-K had a taxable year that ended on
April 30, 2003. For tax year 2005, CORP-K's taxable year
begins on May 1, 2003; it ends on November 30, 2004 in
accordance with paragraph (B)(2)(b) of this rule. For tax
year 2006, CORP-K's taxable year begins on December 1, 2004
and ends on November 30, 2005.
(5) CORP-L was a wholly owned subsidiary of OLDCORP, and each
had a November thirtieth fiscal year-end. As the result of a
sale on July 31, 2004, CORP-L becomes a wholly owned
subsidiary of NEWCORP, who has an April thirtieth fiscal
year-end. Accordingly, CORP-L adopts an April thirtieth
year-end for its annual accounting period.
CORP-L was included in consolidated federal returns with
OLDCORP for the periods December 1, 2002 to November 30, 2003
and December 1, 2003 to July 31, 2004, and is included in
consolidated federal returns with NEWCORP for the periods
August 1, 2004 to April 30, 2005 and May 1, 2005 to April 30,
2006.
For tax year 2004, CORP-L had a taxable year that ended on
November 30, 2003. For tax year 2005, CORP-L's taxable year
begins on December 1, 2003; it ends on July 31, 2004 in
accordance with paragraph (B)(2)(c) of this rule. For tax
year 2006, CORP-L's taxable year begins on August 1, 2004 and
ends on April 30, 2005. For tax year 2007, CORP-L's taxable
year begins on May 1, 2005 and ends on April 30, 2006.
(6) CORP-M was a wholly owned subsidiary of PARENT-1, and
each had a November thirtieth fiscal year-end. As the result
of a sale on July 31, 2004, CORP-M becomes a wholly owned
subsidiary of PARENT-2, who also has an November thirtieth
fiscal year-end. Accordingly, CORP-M retains a November
thirtieth year-end for its annual accounting period and has
had no change of its annual accounting period for purposes of
this rule.
CORP-M was included in consolidated federal returns with
PARENT-1 for the periods December 1, 2002 to November 30,
2003 and December 1, 2003 to July 31, 2004, and is included
in consolidated federal returns with PARENT-2 for the periods
August 1, 2004 to November 30, 2004 and December 1, 2004 to
November 30, 2005.
For tax year 2004, CORP-M had a taxable year that ended on
November 30, 2003. For tax year 2005, CORP-M's taxable year
begins on December 1, 2003 and ends on November 30, 2004 in
accordance with rule 5703-5-03 of the Administrative Code.
For tax year 2006, CORP-M's taxable year begins on December
1, 2004 and ends on November 30, 2005.
Effective: Effective: 1-1-04
Promulgated under: 5703.14
Authorized by: 5703.05
Amplifies: 5733.031, 5733.04, 5733.05
Prior effective dates: 2-25-72, 1-4-89