- 6 -
843, 848 (6th Cir. 1986), affg. on this issue Akers v.
Commissioner, T.C. Memo. 1984-208, revd. on another issue 482
U.S. 117 (1987).
The Commissioner is given broad discretion to require a
taxpayer to comply with tax accounting regulations. For example,
the Commissioner can require that a taxpayer use an accrual
method to report his or her purchases and sales of inventory.
See, e.g., Knight-Ridder Newspapers, Inc. v. United States,
743 F.2d 781, 791 (11th Cir. 1984); Wilkinson-Beane, Inc. v.
Commissioner, supra at 355; see also Caldwell v. Commissioner,
202 F.2d 112 (2d Cir. 1953), affg. a Memorandum Opinion of this
Court dated June 29, 1951. The regulations under sections
446 and 471 provide detailed rules governing the costing and
computation of inventories. The regulations provide that a
taxpayer must keep inventories in computing his or her taxable
income whenever the production, purchase, or sale of merchandise
is an income-producing factor. Secs. 1.446-1(a)(4)(i); 1.471-1,
Income Tax Regs. We consider the facts and circumstances of each
case in deciding whether the purchase or sale of goods is an
income-producing factor. Honeywell, Inc. v. Commissioner, T.C.
Memo. 1992-453, affd. without published opinion 27 F.3d 571 (8th
Cir. 1994); Wilkinson-Beane, Inc. v. Commissioner, T.C. Memo.
1969-79. The facts and circumstances of the instant case support
the conclusion that petitioner's sale of diamonds and other gems
was an income-producing factor in his business. See Knight-
Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011