- 11 - of petitioner’s BUF accounts into conformity with our holding in Sebring constitutes a change in petitioner's method of accounting for those accounts. A change in method of accounting is defined as a “change in the overall plan of accounting for gross income or deductions or a change in the treatment of any material item used in such overall plan.” Sec. 1.446-1(e)(2)(ii), Income Tax Regs. A “material item” is “any item which involves the proper time for the inclusion of the item in income or the taking of a deduction.” Sec. 1.446-1(e)(2)(ii)(a), Income Tax Regs. The regulations further provide that “a change in method of accounting does not include adjustment of any item of income or deduction which does not involve the proper time for the inclusion of the item in income or the taking of a deduction.” Sec. 1.446-1(e)(2)(ii)(b), Income Tax Regs. Accordingly, where a taxpayer’s practice permanently avoids reporting of income and therefore distorts its lifetime income, the practice is not a method of accounting, and section 481(a) is inapplicable to a change of the practice. Schuster’s Express, Inc. v. Commissioner, 66 T.C. 588, 596-598 (1976), affd. without published opinion 562 F.2d 39 (2d Cir. 1977). Petitioners attempt to bring themselves within the rule of Schuster’s Express by arguing that petitioner's practice of offsetting payments into the BUF accounts against gross receipts was not a method of accounting but simply involved the claim of offsets not allowable in any period. Petitioners argue that,Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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