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John P. McDonnell, for petitioner.
Ronald G. Dong, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PARR, Judge: Respondent determined deficiencies in
petitioner's Federal income tax for taxable years 1989 and 1990
of $111,613 and $775, respectively. Respondent also determined a
section 6661 addition to petitioner's tax of $27,903 for taxable
year 1989. All section references are to the Internal Revenue
Code in effect for the taxable years in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure,
unless otherwise indicated. All dollar amounts are rounded to
the nearest dollar.
The issue for decision is: Whether respondent's
determination that petitioner must account for inventories and
use the accrual method of accounting (accrual method) was an
abuse of discretion where petitioner accounted for the materials
consumed in its service business as supplies. We hold it was.1
FINDINGS OF FACT
Some of the facts have been stipulated. The stipulated
facts and the accompanying exhibits are incorporated into our
1 Due to our finding that petitioner is not required to
use an inventory method of accounting, and that respondent abused
her discretion in requiring petitioner to change its method of
accounting, we need not address the issue of whether petitioner
is liable for an addition to tax or penalty for a substantial
understatement of income tax.
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