James M. Rankin and Shirley Rankin - Page 18

                                       - 18 -                                         
          F.2d 1007 (5th Cir. 1979).  The repayment of those balances to              
          petitioner would constitute a recovery or an event fundamentally            
          inconsistent with the premise of the original offsetting against            
          gross receipts of the payments into the BUF accounts, triggering            
          application of the tax benefit rule.8  Hillsboro Natl. Bank v.              
          Commissioner, 460 U.S. 370, 383-384 (1983); sec. 1.111-1(a)(2),             
          Income Tax Regs.  Consequently, petitioner's practice of                    
          offsetting against gross receipts payments into the BUF accounts            
          in issue constitutes a method of accounting, and the change in              
          that practice is a change in method of accounting.  Accordingly,            
          an adjustment may be made pursuant to section 481(a) to prevent             








          8    We note that this Court does not require a taxpayer to                 
          include in income the recovery of an amount that was improperly             
          deducted in a prior year for which the period of limitations has            
          expired.  885 Inv. Co. v. Commissioner, 95 T.C. 156, 165 (1990).            
          Several Circuit Courts of Appeals, including the Ninth, to which            
          an appeal of the instant case would lie (barring stipulation to             
          the contrary), have rejected the so-called erroneous deduction              
          exception to the tax benefit rule.  Id.  Accordingly, pursuant to           
          the rule of Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445           
          F.2d 985 (10th Cir. 1971), we apply the law as announced by the             
          Court of Appeals for the Ninth Circuit.  Consequently, for                  
          purposes of the instant case, the recovery of the payments into             
          the BUF accounts would be included in petitioner's income                   
          pursuant to the tax benefit rule notwithstanding that the offsets           
          against gross receipts claimed for those payments were improper.            
          Unvert v. Commissioner, 656 F.2d 483, 485-486 (9th Cir. 1981),              
          affg. 72 T.C. 807 (1979).                                                   




Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011