IRS allows taxpayers use of statistical sampling IRS allows taxpayers greater use of statistical sampling

August 2011


The IRS recently issued Rev. Proc. 2011-42, which provides taxpayer-favorable guidance on the use and evaluation of statistical samples to support items on tax returns. The revenue procedure strengthens guidance that previously had been set forth only in the form of an IRS Large Business and International (LBI) Division field directive issued in November 2009. The important aspects of Rev. Proc. 2011-42 are that it: •provides a higher level of authority for use of statistical sampling than the field directive;
•is intended to be the primary IRS source for all statistical sampling guidance; and
•modifies other existing IRS sampling guidance, especially revenue procedures on sampling with respect to the section 274 meal and entertainment expense deduction (Rev. Proc, 2004-29) and the section 199 domestic production activities deduction (Rev. Proc. 2007-35), which have been made more taxpayer-friendly. Rev. Proc. 2011-42 is effective for tax years ending on or after August 19, 2011, and may be applied to statistical sampling by taxpayers for tax years ending before that date.

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