- 42 -
a particular method of accounting clearly reflects income is a
question of fact which must be decided on a case-by-case basis.
Ansley-Sheppard-Burgess Co. v. Commissioner, supra; Peninsula
Steel Prods. & Equip. Co. v. Commissioner, 78 T.C. 1029, 1045
(1982). The Court's task is not to determine whether, in its own
opinion, the taxpayer's method of accounting clearly reflects
income but to determine whether there is an adequate basis in law
for the Commissioner's conclusion that it does not. American
Fletcher Corp. v. United States, 832 F.2d 436, 438 (7th Cir.
1987); RCA Corp. v. United States, 664 F.2d 881, 886 (2d Cir.
1981); Ansley-Sheppard-Burgess Co. v. Commissioner, supra.
Financial and tax accounting treatment may often diverge.
Thor Power Tool Co. v. Commissioner, supra at 542-544; Challenge
Publications, Inc. v. Commissioner, 845 F.2d 1541, 1546 (9th Cir.
1988), affg. T.C. Memo. 1986-36. Consequently, even if a method
of accounting comports with Generally Accepted Accounting
Principles (GAAP), the method will not control for tax purposes
if it does not clearly reflect income. Thor Power Tool Co. v.
Commissioner, supra at 538-544; see also Hamilton Indus., Inc. v.
17(...continued)
appeal in the instant case would lie absent stipulation to the
contrary, follows the standard enunciated in Caldwell v.
Commissioner, 202 F.2d 112, 115 (2d Cir. 1953), that "income
should be reflected with as much accuracy as standard methods of
accounting practice permit." Asphalt Prods. Co. v. Commissioner,
796 F.2d 843, 849 (6th Cir. 1986), affg. in part and revg. in
part Akers v. Commissioner, T.C. Memo. 1984-208, revd. per curiam
on another issue 482 U.S. 117 (1987).
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