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Respondent argues that the adjustment in question is not an
adjustment to which section 481(a) applies. We agree with
respondent. None of her $51,305 adjustment is an adjustment
under section 481(a). Because respondent changed petitioner’s
method of accounting effective with his 1988 taxable year, the
change is considered to have been made on January 1, 1988. Sec.
1.481-1(c)(1), Income Tax Regs. On January 1, 1988, petitioner
had $10,000 of inventory. Under the cash method, the cost of
this inventory was deducted by petitioner in a previous year.
Because petitioner would be allowed to treat the cost of this
inventory as an offset against receipts from sales again under
the accrual method, a $10,000 adjustment under section 481(a) is
necessary to prevent the amount from being duplicated.
Respondent, however, does not contend that the $10,000 must be
included in petitioner’s income as a section 481 adjustment.
Accordingly, we consider the adjustment under section 481(a) to
be zero. Cf. Jasionowski v. Commissioner, 66 T.C. 312 (1976).
Thus, we need not concern ourselves with the mechanics of section
481(b), because the adjustment under section 481(a) is zero.
To reflect concessions,
Decision will be entered
under Rule 155.
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