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C. Review of Determinations Made Under Section 446(b)
1. Clear Reflection
Even though a taxpayer is restricted from changing its
method of accounting without the Commissioner's consent, the
Commissioner can change the taxpayer's method when the existing
method does not clearly reflect income. Sec. 446(b). Respondent
determined that Investments’ method of accounting for its new car
and new truck inventories did not clearly reflect income.
Petitioner asserts that Investments’ method of accounting for its
new car and new truck inventories did clearly reflect income.
Inventory accounting is governed by sections 446 and 471.
Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 531 (1979).
Sections 446 and 471 vest the Commissioner with wide discretion
in matters of inventory accounting and give her wide latitude to
adjust a taxpayer’s method of accounting for inventory so as to
clearly reflect income. Id. at 532; Hamilton Indus., Inc. & Sub.
v. Commissioner, supra at 128. Accordingly, the Commissioner's
determination with respect to clear reflection of income is
entitled to more than the usual presumption of correctness, and
the taxpayer bears a heavy burden of overcoming a determination
that a method of accounting does not clearly reflect income.
Hamilton Indus, Inc. & Sub. v. Commissioner, supra at 128; Rotolo
v. Commissioner, 88 T.C. 1500, 1513-1514 (1987). However, if a
18(...continued)
new truck pool; accordingly, we find that petitioner conceded
this issue.
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