Richard D. Hudson and Betty L. Hudson - Page 5

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               Section 446(b) authorizes the Commissioner to exercise her             
          discretion with respect to tax accounting methods.  As stated               
          therein, "if the method used [by the taxpayer] does not clearly             
          reflect income, the computation of taxable income shall be made             
          under such method as, in the opinion of the Secretary, does                 
          clearly reflect income."  Sec. 446(b); see also Thor Power Tool             
          Co. v. Commissioner, 439 U.S. 522 (1979).  In general, a method             
          of accounting clearly reflects income when it accurately reports            
          taxable income under a recognized method of accounting.                     
          Wilkinson-Beane, Inc. v. Commissioner, 420 F.2d 352, 354                    
          (1st Cir. 1970), affg. T.C. Memo. 1969-79; RLC Indus. Co. v.                
          Commissioner, 98 T.C. 457, 490 (1992), affd. 58 F.3d 413 (9th               
          Cir. 1995); Rotolo v. Commissioner, 88 T.C. 1500, 1513 (1987).              
          Courts do not interfere with the Commissioner's discretion with             
          respect to accounting methods unless she has abused it.  Thor               
          Power Tool Co. v. Commissioner, supra at 532; Lucas v. American             
          Code Co., 280 U.S. 445, 449 (1930); Ford Motor Co. v.                       
          Commissioner, 102 T.C. 87, 92 (1994), affd. 71 F.3d 209 (6th Cir.           
          1995).  Whether the Commissioner has abused her discretion is a             
          question of fact, Rodebaugh v. Commissioner, 518 F.2d 73, 75 (6th           
          Cir. 1975), affg. T.C. Memo. 1974-36, and her determination will            
          not be set aside unless it is shown to be "plainly arbitrary",              
          Thor Power Tool Co. v. Commissioner, supra at 533.  Petitioner              
          must prove that the exercise of the Commissioner's discretion was           
          plainly arbitrary.  Asphalt Prods. Co. v. Commissioner, 796 F.2d            

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