- 9 - Adjustments to Taxable Year Ending May 31, 1992 In the notice of deficiency, respondent also adjusted petitioner's taxable income for the taxable year ending May 31, 1992. Respondent reduced petitioner's income by $113,875 because of the change in accounting method. Specifically, respondent decreased petitioner's income by $54,243 to reflect a reduction in gross receipts, decreased petitioner's income by $41,000 to reflect the reduction in the amount of petitioner's work in process, and decreased petitioner's income to reflect an $18,632 increase in the cost of goods sold. Respondent also disallowed a repair expense of $23,624 and reduced petitioner's depreciation deduction by $2,411. As a result of the adjustments, respondent determined that petitioner had a $37,636 net operating loss for the taxable year ending May 31, 1992, rather than $50,000 of taxable income as reported on the return. OPINION I Whether Petitioner Is Required To Change From The Cash Method of Accounting to The Accrual Method of Accounting Section 446(a) requires a taxpayer to compute his taxable income under the same method of accounting by which he regularly computes his income in keeping his books. Section 446(b), however, provides that "if the method used [by the taxpayer] does not clearly reflect income, the computation of taxablePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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