U.S Code last checked for updates: May 27, 2024
§ 458.
Magazines, paperbacks, and records returned after the close of the taxable year
(a)
Exclusion from gross income
(b)
Definitions and special rules
For purposes of this section—
(1)
Magazine
(2)
Paperback
(3)
Record
(4)
Separate application with respect to magazines, paperbacks, and records
(5)
Qualified sale
A sale of a magazine, paperback, or record is a qualified sale if—
(A)
at the time of sale, the taxpayer has a legal obligation to adjust the sales price of such magazine, paperback, or record if it is not resold, and
(B)
the sales price of such magazine, paperback, or record is adjusted by the taxpayer because of a failure to resell it.
(6)
Amount excluded
The amount excluded under this section with respect to any qualified sale shall be the lesser of—
(A)
the amount covered by the legal obligation described in paragraph (5)(A), or
(B)
the amount of the adjustment agreed to by the taxpayer before the close of the merchandise return period.
(7)
Merchandise return period
(A)
Except as provided in subparagraph (B), the term “merchandise return period” means, with respect to any taxable year—
(i)
in the case of magazines, the period of 2 months and 15 days first occurring after the close of taxable year, or
(ii)
in the case of paperbacks and records, the period of 4 months and 15 days first occurring after the close of the taxable year.
(B)
The taxpayer may select a shorter period than the applicable period set forth in subparagraph (A).
(C)
Any change in the merchandise return period shall be treated as a change in the method of accounting.
(8)
Certain evidence may be substituted for physical return of merchandise
Under regulations prescribed by the Secretary, the taxpayer may substitute, for the physical return of magazines, paperbacks, or records required by subsection (a), certification or other evidence that the magazine, paperback, or record has not been resold and will not be resold if such evidence—
(A)
is in the possession of the taxpayer at the close of the merchandise return period, and
(B)
is satisfactory to the Secretary.
(9)
Repurchase by the taxpayer not treated as resale
(c)
Qualified sales to which section applies
(1)
Election of benefits
(2)
Scope of election
(3)
Period to which election applies
(4)
Treatment as method of accounting
(d)
5-year spread of transitional adjustments for magazines
(e)
Suspense account for paperbacks and records
(1)
In general
(2)
Initial opening balance
(3)
Adjustments in suspense account
At the close of each taxable year the suspense account shall be—
(A)
reduced the excess (if any) of—
(i)
the opening balance of the suspense account for the taxable year, over
(ii)
the amount excluded from gross income for the taxable year under subsection (a), or
(B)
increased (but not in excess of the initial opening balance) by the excess (if any) of—
(i)
the amount excluded from gross income for the taxable year under subsection (a), over
(ii)
the opening balance of the account for the taxable year.
(4)
Gross income adjustments
(A)
Reductions excluded from gross income
(B)
Increases added to gross income
If the initial opening balance exceeds the dollar amount of returned merchandise which would have been taken into account under subsection (a) for the taxable year preceding the first taxable year for which the election is effective if this section had applied to such preceding taxable year, then an amount equal to the amount of such excess shall be included in gross income for such first taxable year.
(5)
Subchapter C transactions
(Added Pub. L. 95–600, title III, § 372(a), Nov. 6, 1978, 92 Stat. 2860; amended Pub. L. 115–141, div. U, title IV, § 401(a)(114), (115), Mar. 23, 2018, 132 Stat. 1189.)
cite as: 26 USC 458