- 43 -
Commissioner, 97 T.C. 120, 128 (1991); UFE, Inc. v. Commissioner,
92 T.C. 1314, 1321 (1989); Sandor v. Commissioner, 62 T.C. 469,
477 (1974), affd. 536 F.2d 874 (9th Cir. 1976). Moreover, an
accounting method that conforms to GAAP, but does not comply with
the Commissioner's regulations, may not clearly reflect income.
Peninsula Steel Prods. & Equip. Co. v. Commissioner, supra.
Section 446(c) specifically recognizes as permissible
methods of accounting, the cash receipts and disbursements method
(cash method), an accrual method, any other method permitted by
chapter 1 of the Internal Revenue Code, or any combination of the
foregoing methods permitted under regulations prescribed by the
Secretary of the Treasury (a hybrid method). Generally, under
the cash method of accounting, an item of income or expense is
reported when received or paid, without regard to the economic
events giving rise to the item. Under an accrual method of
accounting, on the other hand, an item of income or expense
generally is reported for the accounting period during which all
the events have occurred which fix the taxpayer's right to
receive the item of income or which establish the fact of
liability giving rise to the deduction, and the amount thereof
can be determined with reasonable accuracy.18 Hallmark Cards,
18
For years after 1984, sec. 461(h) also requires the
occurrence of economic performance with respect to a liability.
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