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argument, as it is plainly at odds with section 446(e) and
section 1.446-1(e)(2)(ii)(c), Income Tax Regs. Furthermore, the
case of Baltimore & O.R.R.. v. United States, supra, is
inapposite herein, because, unlike the case at bar, that case did
not involve an inventory accounting issue. Pacific Enters. &
Subs. v. Commissioner, 101 T.C. 1, 21 (1993).
Having found that Investments changed the treatment of an
item of inventory and that the change did not meet the exception
for a new or separate item, we now must examine whether the item
changed was “material”. 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. In accord with the regulatory
definition of material item, we have previously found that the
essential characteristic of a material item is that it determines
the timing of income or deductions. Hamilton Indus., Inc. & Sub.
v. Commissioner, supra at 126; Wayne Bolt & Nut Co. v.
Commissioner, 93 T.C. 500, 510 (1989); Primo Pants Co. v.
Commissioner, 78 T.C. at 722.16 Thus, we have held that a change
in the method of determining both beginning and ending inventory
16 Although these cases deal with a change in method of
accounting for purposes of sec. 481, they are relevant to our
analysis herein because sec. 481 defers to sec. 446(e) for the
definition of change in method of accounting. Pacific Enters. &
Subs. v. Commissioner, 101 T.C. 1, 21 (1993); Primo Pants Co. v.
Commissioner, 78 T.C. 705, 721 (1982); sec. 1.481-1(a)(1), Income
Tax Regs.
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