Oakcross Vineyards, LTD., Dennis D. Groth, Tax Matters Partner - Page 23

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          v. Commissioner, 62 T.C. 469, 479-481 (1974), affd. 536 F.2d 874            
          (9th Cir. 1976).  Accordingly, we consider cases dealing with               
          material distortions of income arising in connection with the               
          claim of deductions.  In Van Raden v. Commissioner, 71 T.C. at              
          1105-1106, we set forth the following approach to considering the           
          question whether a distortion of income was material:                       
                    Because the method of accounting and the nature of                
               the trade or business are so interdependent, we                        
               conclude that the distortion of income must not be                     
               examined in a vacuum but in light of the business                      
               practice or business activities which give rise to the                 
               transaction which the Commissioner has determined must                 
               be accorded a different accounting treatment.  For                     
               example, material distortions of income may occur if                   
               the sales force of a business is more successful in                    
               December than in January, yet such a distortion would                  
               not require adjustment to clearly reflect income                       
               because the distortion resulted from the business                      
               activity itself. * * *                                                 
               A material distortion of income generally does not occur               
          where a deferral of income arises in the regular course of                  
          business and not from a manipulation of the cash method.  Gold-             
          Pak Meat Co. v. Commissioner, 522 F.2d 1055, 1057 (9th Cir.                 
          1975), remanding T.C. Memo. 1971-83.  Courts have also considered           
          whether a business purpose exists for a transaction in deciding             
          whether a taxpayer's method of accounting for the transaction               
          materially distorts income.  Frysinger v. Commissioner, supra at            
          528; Packard v. Commissioner, supra at 428-430; Van Raden v.                
          Commissioner, 71 T.C. at 1105-1106.  A business purpose exists              
          where the taxpayer establishes a reasonable expectation of                  
          receiving some business benefit from the aspect of the                      

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