Buyers Home Warranty Company - Page 7

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               The adjustments made to implement the new accounting method            
          are applied in the "year of change", defined by section 1.481-              
          1(a)(1), Income Tax Regs, as "the taxable year for which the                
          taxable income of the taxpayer is computed under a method of                
          accounting different from that used for the preceding taxable               
          year."  Neither section 481 nor the accompanying regulations                
          explain how the year of change is chosen.  When the taxpayer                
          requests a change in accounting method, the IRS uses Rev. Proc.             
          92-20, 1992-1 C.B. 685, to determine the year of change.  When              
          the taxpayer makes no request, the changes required by                      
          examination are applied by default to the earliest open year for            
          which the limitations period has not expired.                               
               Here, the year of change is the earliest open year.                    
          Petitioner has stipulated that before the examination began,                
          petitioner made no application to the IRS with respect to                   
          changing its method of accounting.  At no time during the                   
          examination did petitioner submit a Form 3115, formally                     
          requesting to change its accounting method.  Since petitioner did           
          not initiate a change in its accounting method, Rev. Proc. 92-20,           
          supra, does not apply.  The IRS was free to apply the accounting            
          method changes to the earliest open year under examination.                 
          Consequently, the year of change is 1990.                                   
               Petitioner's sole contention is that the year of change                
          should be 1993 instead of 1990.  Petitioner makes two main                  





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