Buyers Home Warranty Company - Page 6

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          taxable years 1988 through 1992 was not in accordance with                  
          section 832(b)(4).                                                          
               The notice of deficiency made various adjustments to                   
          petitioner's income and "provision for reserves" deductions so as           
          to put petitioner on the method of accounting prescribed by                 
          section 832(b)(4).  The notice of deficiency made these changes             
          by determining a deficiency in the first open year, 1990.  The              
          notice of deficiency does not take into account any net operating           
          losses which may have been generated by the 1993 taxable year.              
          The only remaining issue for consideration is which year, 1990 or           
          1993, is the year of change.3                                               
               Section 446(a) requires a taxpayer to compute his taxable              
          income using the method of accounting he uses to calculate his              
          income in keeping his books.  Section 446(b) provides that "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."  When the           
          taxpayer's accounting method is changed, section 481(a) requires            
          that adjustments be made to the taxpayer's income "to prevent               
          amounts from being duplicated or omitted".                                  



               3 The stipulation of facts states that petitioner does not             
          agree that respondent properly applied sec. 481(b).  Petitioner             
          does not argue that point on brief.  Therefore, we treat                    
          petitioner as having conceded the issue.                                    




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Last modified: May 25, 2011