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advice process and advocated that the contracts it sold were
insurance contracts. Respondent's revenue agent took the
position that the contracts were something other than insurance
contracts. On December 10, 1993, respondent issued a Technical
Advice Memorandum concluding that the home warranty contracts are
insurance contracts for purposes of section 832. At no time
during the examination did petitioner submit a Form 3115,
requesting a change in method of accounting, although in 1994
petitioner requested of respondent's Appeals Office that
petitioner be treated as if it had requested a change in method
of accounting.2
The parties have since stipulated that the home warranty
contracts described above are insurance contracts; petitioner is
an "insurance company other than a life insurance company" as
described in section 831; and the revenue generated from the
insurance contracts is "gross income" as defined in section
832(b)(1) and (3). Petitioner reported its income and deductions
from the sale of its insurance contracts using what it believed
to be a GAAP (Generally Accepted Accounting Principles) method of
accounting. The method of accounting used by petitioner for
2 In its briefs, petitioner consistently maintains that the
year of change should be 1993. Petitioner argues that in 1993 it
requested of the Appeals Office that it be treated as if it had
requested a change in accounting method. However, the
stipulation of facts states that petitioner made the request of
the Appeals Office in 1994. Since petitioner uses 1993 in its
brief, we use that year henceforth in this opinion.
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