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Rev. Rul. 66-6, 1966-1 CB 160

REV-RUL, Election to consider cutting as sale or exchange., Rev. Rul. 66-6, 1966-1 CB 160, (Jan. 01, 1966)

SECTION 631.--GAIN OR LOSS IN THE CASE OF TIMBER, COAL, OR DOMESTIC IRON ORE

26 CFR 1.631-1: Election to consider cutting as sale or exchange.
A taxpayer who acquired timber on December 31, 1962, and still owned it at the beginning of his taxable year which began July 1, 1963, has owned such timber for a period of more than six months before the beginning of such taxable year for purposes of section 631(a) of the Internal Revenue Code of 1954. I.T. 3287, C.B. 1939-1 (Part 1), 138 and I.T. 3985, C.B. 1949-2, 51, amplified.

Advice has been requested whether a taxpayer who acquired timber on December 31, 1962, and still owned it at the beginning of his taxable year which began July 1, 1963, has owned such timber for a period of more than six months before the beginning of such taxable year within the meaning of section 631(a) of the Internal Revenue Code of 1954.

Section 631(a) of the Code provides, in pertinent part, that a taxpayer may elect to treat the cutting of timber for sale or use in his trade or business as a sale or exchange of timber cut during the year, providing the taxpayer has owned, or has had a contract right to cut, such timber for a period of more than six months before the beginning of such year.

When a prescribed period of months is before a designated day, date, act, or other event, it is properly computed, in the absence (as here) of a definitely evidenced different intent, by excluding the day so designated and computing the period backward to, and including the day designated as its beginning. See Dutcher v. Wright, 94 U.S. 553 (1876); In re Warner, 144 Fed. 987 (1906); In re Hamilton (Postel v. Broadway Trust Co.), 29 Fed. (2d) 281 (1928); and In re Glenn, 2 Fed. Supp. 579, at 594 (1932), all involving the proper computation of the statutory period of four months before the filing of a petition in bankruptcy. Thus, the general rule is the reverse of that stated in I.T. 3287, C.B. 1939-1 (Part 1), 138. Similarly, the "less one" rule of I.T. 3985, C.B. 1949-2, 51, becomes a "plus one" rule where the period to be computed is before a designated event.

For example, the first day of a period six months before June 16, 1960, would be December 16, 1962, determined by excluding June 16, and computing backward from June 15 to the corresponding date of the appropriate preceding month, i.e. December 15, plus one day, to December 16, 1962. Consequently, for timber to have been held more than six months before June 16, 1963, it must have been acquired before December 16, 1962.

Moreover, when the date before which something must have occurred is the first day of a month, the date which begins the period is determined by going backward to the last day of the appropriate preceding month, plus one.

Furthermore, when the appropriate preceding month has no date corresponding to the date before which something must have occurred, the date beginning the period will be the last day of the appropriate preceding month. For example, five months before July 31, would be February 28 or in a leap year, February 29.

Accordingly, in the instant case, the timber acquired by the taxpayer on December 31, 1962, and still owned by him at the beginning of his taxable year which began July 1, 1963, has been owned for a period of more than six months before the beginning of such taxable year since the first day of a period six months before July 1, 1963, is January 1, 1963, and December 31, 1962, is, therefore, more than six months before July 1, 1963.

When the date before which something must have occurred is the first day of a month, the date which begins a period of months before such other date will be the first day of the appropriate preceding month. Also, when the appropriate preceding month has no date corresponding to the date before which something must have occurred, the date beginning the period will be the last day of the appropriate preceding month.

I.T. 3287, C.B. 1939-1 (Part 1), 138 and I.T. 3985, C.B. 1949-2, 51, are hereby amplified to reflect the reverse chronological computation of the general rules described therein in order to compute (as in this case) a prescribed period of months before a designated event.