taxes imposed under subtitle A of the Code. It has been contended by the organization that it is a "new taxpayer" within the meaning of section 1.442-1 of the Income Tax Regulations. In one case, for the years 1958 to 1964, inclusive, I was an organization exempt from tax under section 501 (a) of the Code but was required to file an annual information return, Form 990, Return of Organization Exempt from Income Tax, pursuant to the provisions of section 6033 of the Code and the regulations thereunder. Throughout the period of its existence it maintained its books and records and filed its annual return of information, Form 990, on the basis of a calendar year accounting period. As of the beginning of the calendar year 1965, I was held to be a taxable organization and was required to file a Form 1120, U.S. Corporation Income Tax Return. Thereupon I desired to change its annual accounting period and adopt as a new taxable year a fiscal year ending June 30. In another case, I was an organization exempt from tax under section 501 (a) of the Code but, because of a specific exception contained in section 6033 of the Code and section 1.6033-1 of the regulations, it was not required to file an annual return of information. I was organized in 1957 and maintained its books and records on the basis of a fiscal year accounting period ending September 30. Effective January 8, 1965, Y was held to be a taxable organization and was required to file a Form 1120 corporation income tax return. Thereupon, I desired to change its annual accounting period and adopt as a new taxable year a fiscal year ending March 31. Section 6033 of the Code provides that every organization, except as therein specifically provided, exempt from taxation under section 501 (a) of the Code shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information as the Secretary or his delegate may by forms or regulations prescribe. This provision of the Code and the regulations thereunder set forth the requirements for filing an annual information return by an organization during the period it is exempt from taxation under section 501 (a) of the Code. However, whether an exempt organization is required to file an annual information return is not relevant to the requirements for filing a return by a taxpayer subject to the taxes imposed by subtitle A of the Code. See sections 6011 and 6012 of the Code and the regulations thereunder, relating to the requirements of returns of income subject to taxation under subtitle A of the Code. With respect to the taxes imposed by subtitle A of the Code, section 441 of the Code, relating to the period for computation of taxable income, provides, in pertinent part, as follows: (a) COMPUTATION OF TAXABLE INCOME.-Taxable income shall be computed on the basis of the taxpayer's taxable year. (b) TAXABLE YEAR.-For purposes of this subtitle, the term "taxable year" means— (1) the taxpayer's annual accounting period, if it is a calendar year or a fiscal year; (2) the calendar year, if subsection (g) applies; or (3) the period for which the return is made, if a return is made for a period of less than 12 months. (c) ANNUAL ACCOUNTING PERIOD.-For purposes of this subtitle, the term "annual accounting period" means the annual period on the basis of which the taxpayer regularly computes his income in keeping his books. (d) CALENDAR YEAR.-For purposes of this subtitle, the term "calendar year" means a period of 12 months ending on December 31. (e) FISCAL YEAR.-For purposes of this subtitle, the term "fiscal year" means a period of 12 months ending on the last day of any month other than December. * * * (g) No Books KEPT; NO ACCOUNTING PERIOD.-Except as provided in section 443 (relating to returns for periods of less than 12 months), the taxpayer's taxable year shall be the calendar year if— (1) the taxpayer keeps no books; (2) the taxpayer does not have an annual accounting period; or (3) the taxpayer has an annual accounting period, but such period does not qualify as a fiscal year. Section 1.441-1(b) (3) of the regulations provides, in part, as follows: (3) A new taxpayer in his first return may adopt any taxable year which meets the requirements of section 441 and this section without obtaining prior approval. The first taxable year of a new taxpayer must be adopted on or before the time prescribed by law (not including extensions) for the filing of the return for such taxable year. ** Section 442 of the Code provides, in part, as follows: If a taxpayer changes his annual accounting period, the new accounting period shall become the taxpayer's taxable year only if the change is approved by the Secretary or his delegate. For purposes of this subtitle, if a taxpayer to whom section 441 (g) applies adopts an annual accounting period (as defined in section 441(e)) other than a calendar year, the taxpayer shall be treated as having changed his annual accounting period. Section 1.442-1(a)(1) of the regulations provides in part, as follows: If a taxpayer wishes to change his annual accounting period (as defined in section 441(c)) and adopt a new taxable year (as defined in section 441 (b)), he must obtain prior approval from the Commissioner by application, as provided in paragraph (b) of this section, or the change must be authorized under the Income Tax Regulations. A new taxpayer who adopts an annual accounting period as provided in section 441 and sections 1.441-1 or 1.441-2 need not secure the permission of the Commissioner under section 442 and this section. * * * Although both X and Y as a result of being held to be taxable organizations are required for the first time to file Form 1120 returns of income subject to the taxes imposed under subtitle A of the Code, neither is a "new taxpayer" within the meaning of the regulations. In order for a corporation to qualify as a "new taxpayer" within the meaning of section 1.442-1 of the regulations, the requirements of section 441 of the Code must be met, and these requirements cannot be met if the taxpayer was in existence, even though exempt from taxation, for a period of time preceding that for which it must file its first return of income subject to taxation under subtitle A of the Code. If a taxpayer was in existence prior to such time and has an established annual accounting period on the basis of which its books and records are kept, then under section 441 (c) of the Code such period is its "annal accounting period" and under section 441 (b) of the Code this is its "taxable year." If such a taxpayer fails to maintain books and records, its "taxable year" is the calendar year under section 441 (g) of the Code. If a return is required to be filed for a period of less than 12 months, see section 443 of the Code. See also The Royal Highlanders v. Commissioner, 1 T.C. 184 (1942), acquiescence, C.B. 1943, 20, reversed on another issue, 138 F. 2d 240 (1943); The Economy Savings & Loan Co. v. Commissioner, 5 T.C. 543 (1945), affirmed on this issue, 158 F.2d 472 (1946). Accordingly, an organization previously exempt from Federal income tax which is thereafter held to be a taxable organization and is required to file a Form 1120 corporation income tax return must file such return on the basis of its established annual accounting period, or, where the organization has no established annual accounting period, such return shall be on the basis of the calendar year, subject to the exception provided in section 443 of the Code, relating to returns for a period of less than 12 months. Since such organization is not a "new taxpayer" within the meaning of section 1.442-1 of the regulations, prior approval of the Commissioner is required before it may adopt a new "taxable year" within the meaning of section 441 (b) of the Code. In view of the foregoing, in the absence of prior approval by the Commissioner of a change in annual accounting period pursuant to the provisions of section 442 of the Code and the regulations, X's annual accounting period is a calendar year and Y's annual accounting period is a fiscal year ending September 30. X is required to file a Form 1120 corporation income tax return for the 12-month calendar year 1965 and Y is required, pursuant to the provisions of section 443 of the Code, to file a short period return for the period commencing January 8, 1965, and ending September 30, 1965. For the requirements in general to secure approval of a change in the annual accounting period, see section 1.442 (b) (1) of the regulations. SECTION 443.-RETURNS FOR A PERIOD OF LESS 26 CFR 1.443-1: Returns for periods of less than 12 months. Filing of a return for a short period in the first taxable year that a previously exempt organization becomes subject to Federal income tax. See Rev. Rul 67-173, page 101. Whether affiliated corporations filing consolidated returns ar required to annualize short-period income. See Rev. Rul. 67-189 page 255. PART II.-METHODS OF ACCOUNTING Subpart A.-Methods of Accounting in General SECTION 446.-GENERAL RULE FOR METHODS OF ACCOUNTING 26 CFR 1.446-1: General rule for methods of accounting. Procedure for changing overall method of accounting from cash receipts and disbursements method to accrual method. See Rev. Proc. 67-10, page 585. Subpart B.-Taxable Year for Which Items of Gross Income Included SECTION 451.-GENERAL RULE FOR TAXABLE 26 CFR 1.451-1: General rule for taxable year of inclusion. (Also Section 74; 1.74-1.) Rev. Rul. 67-203 A winner of the Irish Sweepstakes reports his income on the cash receipts and disbursements basis, and, by reason of being a minor his winnings must be held by the Irish court until he reaches majority. Held, the economic benefit doctrine applies and requires the inclusion of the present value of the sweepstakes winnings in the minor's gross income at the time the funds are paid over to the Irish court. See E. T. Sproull v. Commissioner, 16 T.C. 244 (1950), affirmed, 194 F. 2d 541 (1952). Treatment of amounts payable with respect to gasoline used on a farm for farming purposes which farmers may claim as a credit against their income tax for taxable years beginning after June 30, 1965. See Rev. Rul. 67-2, page 13. SECTION 453.-INSTALLMENT METHOD 26 CFR 1.453-1: Installment method of reporting income. Rev. Rul. 67-147 The taxpayer, a dealer in personal property, has consistently used the installment method of accounting for book and Federal income tax purposes with respect to its installment sales. In connection with a public offering of its stock, the taxpayer desires to change to an accrual method of accounting for book purposes with respect to its installment ales but wishes to continue on the installment method of accounting for Federal income tax purposes. Held, if the taxpayer maintains permanent auxiliary records with its regular books of account reconciling the difference in installment sales for book and Federal income tax purposes, it may continue to use the installment sales method for Federal income tax purposes although it changes its book method of accounting for such sales to an accrual method. See sections 1.453-1(f) and 1.453-2(c) of the Income Tax Regulations. 26 CFR 1.453-2: Special rules applicable to dealers in personal property. Service charges paid by department store customers on purchases made under a so-called budget charge account. See Rev. Rul. 67-62, page 44. 26 CFR 1.453-9: Gain or loss on disposition of installment obligations. (Also Sections 673, 677; 1.673(b)-1, 1.677 (a)-1.) Rev. Rul. 67-70 The transfer to a reversionary trust of an installment obligation is not a disposition within the meaning of section 453 (d) of the Internal Revenue Code of 1954 where the grantor is treated as the owner of a portion of the trust consisting of the deferred profit included in the installment obligation. The grantor is taxable on the deferred profit as the installment payments are received by the trust. The grantor is not taxable on the interest income earned by the trust and paid to a charitable beneficiary for a period of 2 years and 1 month from the date of transfer of the installment obligation to the trust. Advice has been requested whether the transfer of an installment obligation to a trust is a "disposition" within the meaning of section 453 (d) of the Internal Revenue Code of 1954 under the following circumstances. The grantor sold property and accepted an installment note providing for payment in monthly installments over a number of years plus interest at 6 percent on the unpaid balance. He elected to report the gain on the sale on the installment method of accounting under section 453 of the Code. The grantor, while the installment obligation still had over 2 years to run, transferred the installment note to a trust. The trust instrument provides that the term of the trust should be 2 years and 1 month; that the income of the trust, consisting solely of the interest earned on the note during the period it is trust property be paid to a named charitable beneficiary (which was of the type described in section 170(b) (1)(A)(ii) of the Code); and that the deferred profit and return of capital (principal) in the payments received by the trust, be paid to the grantor. On termination of the trust the installment note reverts to the grantor. Section 453 (d) of the Code provides, in part, that if an installament obligation is disposed of gain or loss shall result to the transferor in the taxable year in which the disposition occurs. Section 677(a) of the Code provides, in part, that the grantor of a trust shall be treated as the owner of any portion of a trust whose |