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We hold it was an abuse of respondent's discretion to
require petitioner to change from the cash method to
respondent's improper and inaccurate method.
C. For the Taxable Year at Issue, Petitioner Is Not Required
To Change From the Cash Method of Accounting
Courts have recognized that the regulations do not impose
an absolute prohibition of the use of the cash method upon a
taxpayer who is required to maintain inventories. Cf. Asphalt
Prods. Co. v. Commissioner, 796 F.2d at 849 (an insignificant
increase in inventories may be grounds for finding an abuse of
discretion by the Commissioner); Estate of Sperling v.
Commissioner, 341 F.2d 201, 204 (2d Cir. 1965), affg. T.C.
Memo. 1963-260 (courts will not require the Commissioner to
place a taxpayer on the accrual method); Drazen v.
Commissioner, 34 T.C. 1070, 1079 (1960) (where inventories are
so small as to be of no consequence or consist primarily of
labor, the presence of inventories is not necessarily
sufficient to require a change in the taxpayer's method of
accounting).
In Estate of Sperling v. Commissioner, supra, the taxpayer
argued that it was required to account for inventories and,
therefore, the Commissioner should have used the accrual method
in determining the tax deficiency. The court stated:
It is difficult to find any basis in reason for
thus placing the burden on the Commissioner to place
the taxpayer's tax returns on a different accounting
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