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Dealership is treated as owner of the PLRF, to include investment
income as it accrues. For cases (1) through (4), a deduction is
allowable for the year in which the expense is incurred or, if
capitalized, the year in which it is taken into account through
amortization.
Thus, the Dealership's practice resulted in permanent
exclusion only where a deduction would have been allowable for a
later period. Compared with the proper application of the
accrual method, the Dealership's practice had the effect of
either deferring income (cases (5) and (6)) or accelerating a
deduction (cases (1) through (4)). Correction of this practice
cannot affect the Dealership's lifetime taxable income under any
circumstances: it can only affect the time when an increase or
offsetting reduction to lifetime income is taken into account.
Cf. Knight-Ridder Newspapers v. United States, 743 F.2d 781, 798-
799 (10th Cir. 1984). Accordingly, the correction represents a
change in method of accounting for purpose of section 481.
The second requirement for application of section 481 is
that, in the absence of an adjustment for prior years, amounts
would be duplicated or omitted in the computation of taxable
income solely by reason of the change in method of accounting.
This requirement is also satisfied. Income attributable to
contracts in prior years which the Dealership would have reported
in some later years in cases (5) and (6) would be omitted as a
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