-14- Petitioners contend that respondent's position on the method of accounting issue was not reasonable as a matter of law or fact. In support of their contentions, petitioners allege that ASAP is not expressly prevented from the use of the cash method of accounting by any section of the Internal Revenue Code (the Code) or regulations. In support of their position, petitioners cite section 446(c)(1) which provides that a taxpayer may compute taxable income under the cash receipts and disbursements method of accounting. In addition, petitioners contend that respondent's application of the substantial-identity-of-results test to support her determination is an abuse of discretion. The issue we must decide is whether the Commissioner's determination that ASAP report its income on the accrual method of accounting constitutes an abuse of discretion. In reviewing the Commissioner's determination that the taxpayer's method of accounting does not clearly reflect income, the function of this Court is to determine whether there was an adequate basis in law for the Commissioner's conclusion. RCA Corp. v. United States, 664 F.2d 881, 886 (2d Cir. 1981). The Commissioner is granted broad discretion in determining whether a taxpayer's use of an accounting method clearly reflects income. Sec. 446(b); United States v. Catto, 384 U.S. 102, 114 & n.22 (1966), rehearing denied 384 U.S. 981 (1966); Commissioner v. Hansen, 360 U.S. 446, 467 & n.12 (1959); Lucas v. Am. Code Co., 280 U.S. 445, 449 (1930). No method of accounting is acceptable unless, in thePage: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
Last modified: May 25, 2011