- 61 -
resulted in a mismatching of receipts from sales and cost of
sales and therefore the cash method was not appropriate. The
Court of Appeals for the Sixth Circuit agreed that the change of
accounting method by the Commissioner was not an abuse of
discretion under the circumstances in that "Though the temporary
increase in inventory in the present case was not significant,
the large increase in accounts receivable created a situation
where only use of the accrual method of accounting would avoid a
serious distortion." Asphalt Prods. Co. v. Commissioner, supra
at 848-849.
Relying on Wilkinson-Beane, Inc. v. Commissioner, supra, the
Court of Appeals for the Sixth Circuit concluded that "Where the
Commissioner has determined that the accounting method used by a
taxpayer does not clearly reflect income, in order to prevail,
'the taxpayer must demonstrate substantial identity of results
between his method and the method selected by the Commissioner.'"
Id. at 849. In that case, the taxpayer reported income from the
sale of merchandise on the cash method of accounting. In the
instant case, the hospitals used a hybrid method, not a cash
method of accounting. In Wilkinson-Beane, Inc. v. Commissioner,
T.C. Memo. 1969-79, we specifically cautioned that "It must be
remembered that our analysis of the above regulations and cases
is in the context of the cash or accrual bases of accounting. We
are not faced with a hybrid method."
Page: Previous 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 NextLast modified: May 25, 2011