Gary L. Pierce - Page 14

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          receipts and disbursements method; (2) an accrual method; (3) any           
          other method permitted by this chapter; or (4) any combination of           
          the foregoing methods permitted under regulations prescribed by             
          the Secretary.”  Sec. 446(c).  The regulations permit “any                  
          combination of * * * [the cash, accrual, or other permissible]              
          methods of accounting * * * if such combination clearly reflects            
          income and is consistently used.”  Sec. 1.446-1(c)(1)(iv), Income           
          Tax Regs.  A method of accounting includes an overall method and            
          any specialized methods the taxpayer may use for individual                 
          items.  Burck v. Commissioner, 63 T.C. 556, 561 (1975), affd. 533           
          F.2d 768 (2d Cir. 1976); sec. 1.446-1(a), Income Tax Regs.                  
               A taxpayer may adopt any permissible method of accounting on           
          the first income tax return on which an item appears.  Once a               
          permissible method is chosen, the taxpayer must secure the                  
          consent of the Secretary before adopting a new method.  Sec.                
          446(e).  A change in the method of accounting includes a change             
          in the overall plan of accounting or a change in the treatment of           
          any material item used in the overall plan.  Sec. 1.446-                    
          1(e)(2)(ii)(a), Income Tax Regs.                                            
               Petitioner contends that Mary Catherine has been using an              
          inventory method of accounting, including LCM, since Mary                   
          Catherine’s inception.  Respondent contends that real estate                
          developers are not entitled to use inventory methods of                     
          accounting, such as LCM, for income tax purposes.  Respondent               





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