- 28 -
year to avoid liquidating a LIFO layer, causing a match of
historical costs against current revenues. Thus, depending on a
taxpayer’s particular set of facts and circumstances, it may be
advantageous to have a lower annual deflator index.
When Investments changed its definition of its items of
inventory, which resulted in lower annual and cumulative indexes
and, therefore, affected the computation of beginning and ending
inventory, the change was a change in the treatment of a material
item. Hamilton Indus., Inc. & Sub. v. Commissioner, 97 T.C. at
126; Wayne Bolt & Nut Co. v. Commissioner, supra at 510; Primo
Pants Co. v. Commissioner, supra at 722. After changing its
definition of items for its new car pool from body size to model
line in taxable year 1981, Investments did not file a Form 3115,
Application for Change in Accounting Method, or otherwise request
respondent’s consent to change its LIFO inventory valuation
method.17 Therefore, we hold that Investments changed its method
of accounting without respondent’s consent.18
17 The purpose of the sec. 446(e) consent requirement is to
enable the Commissioner to prevent distortions of income that
often accompany changes in accounting methods by withholding her
consent until the taxpayer agrees to adjustments that will
prevent duplications or omissions of items of income and expense.
Advertisers Exch., Inc. v. Commissioner, 25 T.C. 1086, 1093
(1956), affd. 240 F.2d 958 (2d Cir. 1957); see sec. 481(a).
18 Respondent also determined that Investments changed its
method of accounting when it changed the definition of its items
of inventory for its new truck pool. At trial and on brief,
petitioner argued that the change from body size to model line in
Investments' new car pool was not a change in method of
accounting. However, petitioner did not specifically address the
change in method of accounting issue with respect to Investments'
(continued...)
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