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regulations thereunder follow the statutory text in stating that
a method of accounting for inventory "must conform as nearly as
may be to the best accounting practice in the trade or business,"
and "must clearly reflect the income." Sec. 1.471-2(a)(1) and
(2), Income Tax Regs.
Section 446(a) contains the general rule for tax
accounting. Section 446(a) states that the accounting method
used to compute taxable income generally must be based on the
method of accounting used to compute book income. When the
accounting method used to compute taxable income does not clearly
reflect income, section 446(b) gives the Commissioner broad
authority to prescribe a method that does clearly reflect income.
Thor Power Tool Co. v. Commissioner, supra at 532; Commissioner
v. Hansen, 360 U.S. 446, 467 (1959); Ford Motor Co. v.
Commissioner, 71 F.3d 209 (6th Cir. 1995), affg. 102 T.C. 87
(1994); see also sec. 1.446-1(a)(2), Income Tax Regs. ("no method
of accounting is acceptable unless, in the opinion of the
Commissioner, it clearly reflects income"). The Commissioner's
exercise of authority under section 446(b) is given "much
latitude" and cannot be disturbed unless "clearly unlawful".
Thor Power Tool Co. v. Commissioner, 439 U.S. at 532-533; Lucas
v. American Code Co., 280 U.S. 445, 449 (1930); see also United
States v. Catto, 384 U.S. 102 (1966); Schlude v. Commissioner,
372 U.S. 128, 133-134 (1963); American Auto. Association v.
United States, 367 U.S. 687, 697-698 (1961); Automobile Club of
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