E.W. Richardson - Page 1

                                 T.C. Memo. 1996-368                                  

                               UNITED STATES TAX COURT                                

                           E.W. RICHARDSON, Petitioner v.                             
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 27308-92.                  Filed August 12, 1996.           

                    During the years in issue, P was the sole                         
               shareholder of I.  I was a subch. S corporation that,                  
               among other things, provided management consulting                     
               services and operated an automobile dealership through                 
               one of its divisions.  I valued its new car and new                    
               truck inventories on the last-in, first-out (LIFO)                     
               method.  During the years in issue, I owned and                        
               maintained an airplane.  The airplane was used in                      
               connection with I’s operation of its divisions and in                  
               providing management consulting services.                              
                    1.  Held:  When I began defining its items of                     
               inventory for its new car LIFO pool by model line,                     
               rather than body size, it changed the treatment of a                   
               material item.  This change in item was material                       
               because it affected the computation of beginning and                   
               ending inventory.  Since I changed the treatment of a                  
               material item used in its overall method of inventory                  
               accounting, it changed its method of accounting.  Sec.                 
               446(e), I.R.C.; sec. 1.446-1(e)(2)(ii)(a),(c), Income                  
               Tax Regs.                                                              

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