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inventories for tax purposes. To resolve these issues, we
consider sections 446 and 471 and the regulations thereunder.
Pursuant to section 446,4 the Commissioner has broad powers
to determine whether an accounting method used by a taxpayer
clearly reflects income. Commissioner v. Hansen, 360 U.S. 446,
467 (1959); Ansley-Sheppard-Burgess Co. v. Commissioner, 104 T.C.
367, 370 (1995). Courts do not interfere with the Commissioner's
determination under section 446 unless it is clearly unlawful.
Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 532 (1979);
Cole v. Commissioner, 586 F.2d 747, 749 (9th Cir. 1978), affg. 64
4 Section 446 provides in pertinent part:
SEC. 446(a). General Rule.--Taxable income shall be
computed under the method of accounting on the basis of
which the taxpayer regularly computes his income in keeping
his books.
(b) Exceptions.--If no method of accounting has been
regularly used by the taxpayer, or if the method used does
not clearly reflect income, the computation of taxable
income shall be made under such method as, in the opinion of
the Secretary, does clearly reflect income.
(c) Permissible Methods.--Subject to the provisions of
subsections (a) and (b), a taxpayer may compute taxable
income under any of the following methods of accounting--
(1) the cash 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.
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