[Code of Federal Regulations]
[Title 26, Volume 6]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.456-4]

[Page 148]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
DEFERRED COMPENSATION, ETC.--Table of Contents
 
Sec. 1.456-4  Cessation of liability or existence.

    (a) If a taxpayer has elected to apply the provisions of section 456 
to a trade or business in connection with which prepaid dues income is 
received, and if the taxpayer's liability to render services or make 
available membership privileges ends for any reason, as for example, 
because of the cancellation of a membership then so much of the prepaid 
dues income attributable to such liability as was not includible in the 
taxpayer's gross income under section 456 for preceding taxable years 
shall be included in gross income for the taxable year in which such 
liability ends. This paragraph shall not apply to amounts includible in 
gross income under Sec. 1.456-7.
    (b) If a taxpayer which has elected to apply the provisions of 
section 456 ceases to exist, then the prepaid dues income which was not 
includible in gross income under section 456 for preceding taxable years 
shall be included in the taxpayer's gross income for the taxable year in 
which such cessation of existence occurs. This paragraph shall not apply 
to amounts includible in gross income under Sec. 1.456-7.
    (c) If a taxpayer is a party to a transaction to which section 
381(a) applies and the taxpayer's method of accounting with respect to 
prepaid dues income is used by the acquiring corporation under the 
provisions of section 381(c)(4), then neither the liability nor the 
existence of the taxpayer shall be deemed to have ended or ceased. In 
such cases see section 381(c)(4) and the regulations thereunder for the 
treatment of the portion of prepaid dues income which was not included 
in gross income under section 456 for preceding taxable years.

[T.D. 6937, 32 FR 16395, Nov. 30, 1967]