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that petitioners have not satisfied the conditions for employing
that method.
Where it applies, section 481(b)(2),14 in general, limits
the increase in tax in the year of change attributable to a
section 481(a) adjustment to the net increase in income tax that
would result from allocating that portion of the adjustment to
prior consecutive taxable years to which it is properly allocable
pursuant to the new method of accounting, with the balance of the
14 Sec. 481(b)(2) provides as follows:
SEC. 481(b). Limitation on Tax Where Adjustments Are
Substantial.--
* * * * * * *
(2) Allocation under new method of accounting.--If--
(A) the increase in taxable income for the year of
the change which results solely by reason of the
adjustments required by subsection (a)(2) exceeds
$3,000, and
(B) the taxpayer establishes his taxable income
(under the new method of accounting) for one or more
taxable years consecutively preceding the taxable year
of the change for which the taxpayer in computing
taxable income used the method of accounting from which
the change is made,
then the tax under this chapter attributable to such
increase in taxable income shall not be greater than the net
increase in the taxes under this chapter (or under the
corresponding provisions of prior revenue laws) which would
result if the adjustments required by subsection (a)(2) were
allocated to the taxable year or years specified in
subparagraph (B) to which they are properly allocable under
the new method of accounting and the balance of the
adjustments required by subsection (a)(2) was allocated to
the taxable year of the change.
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