-16-
1045; Bay State Gas Co. v. Commissioner, 75 T.C. 410, 422 (1980),
affd. 689 F.2d 1 (1st Cir. 1982).
At the outset, we note that the use of the cash method of
accounting has a long history of acceptance by the Congress. See
sec. 8(g) of the Revenue Act of 1916, ch. 463, 39 Stat. 756, 763
("An individual keeping accounts upon any basis other than that
of actual receipts and disbursements, unless such other basis
does not clearly reflect income, may * * * make his return upon
the basis upon which his accounts are kept".). Moreover, section
446 specifically authorizes a taxpayer to use the cash receipts
and disbursements method of accounting (cash method) to compute
taxable income, provided it is the method of accounting the
taxpayer regularly uses to compute his income in keeping his
books, and it clearly reflects income. Sec. 446(a), (b), (c)(1).
Generally, under the cash method of accounting, an item of
income or expense is reported when received or paid without
regard to the economic events giving rise to the item. On the
other hand, under the accrual method of accounting, an item of
income or expense generally is reported for the accounting period
during which all the events have occurred which fix the
taxpayer's right to receive the item of income or which establish
the fact of liability giving rise to the deduction, and the
amount thereof can be determined with reasonable accuracy.
Hallmark Cards, Inc. v. Commissioner, supra at 32; Secs. 1.446-
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