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transaction challenged by the Commissioner. Packard v.
Commissioner, supra at 428. Furthermore, a material distortion
of income is likely to be found where the amount of an item
differs substantially from what might normally be expected in an
arm's-length transaction structured without special regard to tax
consequences.4 Lewis v. Commissioner, 65 T.C. 625, 629 (1975).
Moreover, we have recognized that the interval of time between
the reporting of the payment of expenses and the receipt of
associated income can be so great that the use of the cash method
of accounting by a taxpayer results in an impermissible
distortion of income. Silberman v. Commissioner, T.C. Memo.
1983-782, affd. without published opinions sub nom. Appeal of
David Whin, Inc., Appeal of Giordano, Appeal of Malanka, Stamato
v. Commissioner, 770 F.2d 1068, 1069, 1072, 1075 (3d Cir. 1985)
Where related parties deal with each other on the same terms
as with unrelated parties, a method of accounting will not be
considered to materially distort income simply because the
parties to a transaction are related. Gold-Pak Meat Co. v.
Commissioner, supra at 1057. Nonetheless, it is also well
established that transactions between related parties are closely
scrutinized. Spicer Accounting, Inc. v. United States, 918 F.2d
90, 92 (9th Cir. 1990); Hulter v. Commissioner, 91 T.C. 371, 394
4 We note that an accounting method can produce a material
distortion of income even where a taxpayer does not have a tax
avoidance motive in employing it. Anderson v. Commissioner, T.C.
Memo. 1975-302, affd. 568 F.2d 386 (5th Cir. 1978).
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