Grady Whitlock Leasing Corporation - Page 6

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          Section 1.446-1(c)(1)(iv)(a), Income Tax Regs., further provides            
          that, while combinations of methods that clearly reflect income             
          and are consistently used will be permitted, nonetheless,                   
               a taxpayer who uses the cash method of accounting in                   
               computing gross income from his trade or business shall                
               use the cash method in computing expenses of such trade                
               or business.  * * *                                                    
          Thus, it is clear that petitioner may not deduct certain expenses           
          using the accrual method when its primary method for reporting              
          income is the cash method.  Miele v. Commissioner, 72 T.C. 284,             
          291 (1979); Connors, Inc. v. Commissioner, 71 T.C. 913, 916-917             
          (1979).  The fact that petitioner has used this combination of              
          cash and accrual accounting in the past is of no consequence.  A            
          consistent application of an improper method or combination will            
          not ratify petitioner's mistake nor prevent respondent's                    
          correction of it.  Miele v. Commissioner, supra at 291.                     
               To reflect the foregoing,                                              
                                        Decision will be entered                      
                                   for respondent.                                    

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