- 33 -
law, e.g., Fort Howard Paper Co. v. Commissioner, supra at 284.
Investments’ inventory practice was inconsistent from year to
year, and therefore its method of inventory accounting does not
clearly reflect income.19
2. Abuse of Discretion
Respondent determined that Investments should define its
items of inventory for both its new car and new truck pools by
model code. Petitioner asserts that such a determination was an
abuse of discretion.
Once the Commissioner determines that a taxpayer's method
does not clearly reflect income, she may select for the taxpayer
a method which, in her opinion, does clearly reflect income.
Sec. 446(b); Hamilton Indus., Inc. & Sub. v. Commissioner, 97
T.C. at 129. The taxpayer has the burden of showing that the
method selected by the Commissioner is incorrect, and that burden
is extremely difficult to carry. Photo-Sonics, Inc. v.
Commissioner, supra at 933. Accordingly, the Commissioner’s
determination will not be set aside unless shown to be clearly
unlawful or plainly arbitrary. Thor Power Tool Co. v.
Commissioner, 439 U.S. at 532; Hamilton Indus., Inc. & Sub. v.
Commissioner, supra at 129; Richardson Invs., Inc. v.
Commissioner, 76 T.C. at 745.
19 Respondent made alternative arguments as to why Investments'
method of defining its items of inventory did not clearly reflect
income. Having disposed of the clear reflection issue, we need
not address these alternative arguments.
Page: Previous 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 NextLast modified: May 25, 2011