E.W. Richardson - Page 20

                                       - 20 -                                         
          The regulations define “material item” as “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.12                                                                 
               The regulations also define certain situations in which a              
          change does not rise to the level of a change in method of                  
          accounting.  Specifically, section 1.446-1(e)(2)(ii)(b), Income             
          Tax Regs., provides:                                                        
               A change in method of accounting does not include correction           
               of mathematical or posting errors, or errors in the                    
               computation of tax liability * * *.  Also, 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 of income or the taking             
               of a deduction. * * * A change in the method of accounting             
               also does not include a change in treatment resulting from a           
               change in underlying facts. * * *                                      
               1. Unauthorized Change After Richardson I                              
               Respondent determined that Investments originally elected to           
          define its inventory units for its new car pool by model code but           


          12   Sec. 472 and the regulations thereunder provide more                   
          specific guidance on when a change in method occurs in the LIFO             
          method of accounting.  Sec. 472(e) provides that a taxpayer may             
          not change from the LIFO method to another method of inventory              
          accounting without the consent of the Commissioner.  With respect           
          to the dollar-value method of LIFO, the regulations provide that            
          a taxpayer may not change its pricing method, e.g., link-chain              
          method, without the consent of the Commissioner.  Sec. 1.472-               
          8(e)(1), Income Tax Regs.  In addition, the regulations provide             
          that any change in pooling used in computing LIFO inventories               
          requires the consent of the Commissioner.  Sec. 1.472-8(g)(1),              
          Income Tax Regs.  Here, respondent does not argue that                      
          Investments changed its overall method of accounting for                    
          inventory, i.e., the dollar-value LIFO method, nor does she argue           
          that Investments changed its overall pricing method or the number           
          of pools it utilized.                                                       




Page:  Previous  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  Next

Last modified: May 25, 2011