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March 11, 2022
Question

form 3115

  • March 11, 2022
  • 1 reply
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Last tax year I made a timely mark-to-market election under 475(f) for investment trading.  I meet the requirements and this is a regular, substantial activity.  This year will be my first year under that accounting method and will need to file form 3115 (actual application of change of accounting method).  Most questions on 3115 are straight-forward, however question 7a&b regarding audit protection is not.  Reading the IRS pub, I assume that audit protection applies (question 7a) and since it is Yes question 7b must be checked.

--Is 7a correct (yes)?

--What is checked in 7b?

    1 reply

    ColeenD3
    March 12, 2022

    We can't tell you how to fill out a form. TurboTax is a self-prepared program.

     

    Instructions for Form 3115 state this:

     

    Line 7a. In general, audit protection applies when an application for change in accounting method is granted. See section 8.01 of Rev. Proc. 2015-13. For exceptions where audit protection is not provided, see section 8.02 of Rev. Proc. 2015-13.

    For example, a change made under DCN 10 in the List of Automatic Changes for an applicant's sale, lease, or financing transactions does not receive audit protection. See the List of Automatic Changes for additional method changes not subject to audit protection. If no audit protection is given for the requested change, check “No” and attach an explanation. For example, if you are making a change under DCN 10, your explanation is DCN 10. If you are making a change under DCN 7, your explanation could be that none of the items on line 7b applies. If multiple items are being changed on one Form 3115 and at least one item has audit protection and another item does not have audit protection, check both “Yes” and “No.”

     

    Line 7b. Generally, the applicant receives audit protection for tax years prior to the year of change if they fall into one of the following categories listed below. If Form 3115 is being filed on behalf of multiple applicants or if multiple items are being changed on one Form 3115, check all that apply and attach a statement identifying which category applies to which applicant or item. Except for “Not under exam” and “Other".

     

    Instructions Form 3115