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keeping its books. Section 446(b), however, provides that if the
method of accounting regularly utilized by the taxpayer does not
clearly reflect taxable income, the computation of taxable income
shall be made under such method as, in the Commissioner's
opinion, does clearly reflect income. The Commissioner's
authority under section 446(b) reaches not only overall methods
of accounting but also a taxpayer's method of accounting for
specific items of income and expense. Ford Motor Co. v.
Commissioner, 102 T.C. 87, 100 (1994), affd. 71 F.3d 209 (6th
Cir. 1995); Prabel v. Commissioner, 91 T.C. 1101, 1112 (1988),
affd. 882 F.2d 820 (3d Cir. 1989); sec. 1.446-1(a), Income Tax
Regs.
It is well recognized that section 446 grants the
Commissioner broad discretion in matters of accounting and gives
the Commissioner wide latitude to adjust a taxpayer's method of
accounting so as to reflect income clearly. E.g., Thor Power
Tool Co. v. Commissioner, 439 U.S. 522, 532-533 (1979);
Commissioner v. Joseph E. Seagram & Sons, Inc., 394 F.2d 738, 743
(2d Cir. 1968), revg. 46 T.C. 698 (1966); Thomas v. Commissioner,
92 T.C. 206, 220 (1989). Section 446 imposes a heavy burden of
proof on a taxpayer disputing the Commissioner's determination on
accounting matters. Thor Power Tool Co. v. Commissioner, supra
at 532-533. To prevail, a taxpayer must establish that
respondent's determination is "clearly unlawful" or "plainly
arbitrary". Id.
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