37
accordance with established industry practice that has been in
effect for decades, respondent's characterization of these costs
as capital expenditures would amount to a change in its
accounting "methods" contrary to section 446. Section 446(a)
permits a taxpayer to compute taxable income "under the method of
accounting on the basis of which the taxpayer regularly computes
his income in keeping his books." A taxpayer's "method of
accounting" includes not only the overall method of accounting,
but also the accounting treatment of any item. Sec. 1.446-
1(a)(1), Income Tax Regs. However, section 446(b) provides in
effect that if the taxpayer's method does not clearly reflect
income, the Secretary may redetermine and recompute the taxable
income under a method which, in his opinion, does clearly reflect
income.24 Section 446(b) imposes a burden of proof upon
petitioner to demonstrate that respondent abused his discretion
in changing petitioner's accounting method. Resnik v.
Commissioner, 66 T.C. 74, 78 (1976), affd. per curiam 555 F.2d
634 (7th Cir. 1977). Petitioner's burden of proof is heavier
than merely proving that the determination of the Commissioner
was erroneous. Seligman v. Commissioner, 84 T.C. 191, 199-200
n.9 (1985), affd. 796 F.2d 116 (5th Cir. 1986).
In Electric & Neon, Inc. v. Commissioner, 56 T.C. 1324
(1971), affd. without published opinion 496 F.2d 876 (5th Cir.
1974), the taxpayer improperly characterized capital expenditures
24Respondent argues that the adjustments in these cases are
based on sec. 263(a), and not on his authority under sec. 446(b).
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