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(c) Permissible Methods.--Subject to the
provisions of subsections (a) and (b), a taxpayer may
compute taxable income under any of the following
methods of accounting--
(1) the cash receipts and disbursements method;
(2) an accrual method;
(3) any other method permitted by this chapter; or
(4) any combination of the foregoing methods
permitted under regulations prescribed by the
Secretary.
In construing section 446, the Commissioner has broad powers
to determine whether accounting methods used by a taxpayer
clearly reflect income. Commissioner v. Hansen, 360 U.S. 446,
467 (1959). Courts do not interfere with the Commissioner's
determination unless it is an abuse of discretion. Thor Power
Tool Co. v. Commissioner, 439 U.S. 522, 532 (1979); Lucas v.
American Code Co., 280 U.S. 445, 449 (1930); Ford Motor Co. v.
Commissioner, 102 T.C. 87, 91 (1994), affd. 71 F.3d 209 (6th Cir.
1995).
Petitioner changed its method of accounting during the
period in question without obtaining prior approval from
respondent. In particular, for the fiscal year ending January
31, 1988, petitioner used the accrual method of accounting for
financial statement purposes and income tax purposes. However,
for the fiscal years ending January 31, 1989 and 1990, petitioner
used the accrual method of accounting and the percentage of
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