Jim Turin & Sons, Inc. - Page 4

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               In performing its paving contracts, petitioner takes                   
          delivery of the asphalt when its temperature is between 300 and             
          320 degrees Fahrenheit.  If the asphalt is not on the ground and            
          rolled by the time it is 150 degrees, it can no longer be used.             
          Under normal circumstances, the window of opportunity is                    
          approximately 3 hours.                                                      
               Petitioner has approximately 100 to 150 jobs or contracts              
          per year of varying size and complexity.  Generally, petitioner             
          does not get paid until it completes a job.  When a job is                  
          finished, petitioner bills the customer and requires payment                
          typically within 30 days.                                                   
                                       OPINION                                        
               Respondent determined that for the taxable years 1990, 1991,           
          and 1993,2 petitioner's asphalt was merchandise that was an                 
          income-producing factor, that petitioner therefore had                      
          inventories, and thus it must use the accrual method of                     
          accounting in order to clearly reflect taxable income.                      
               The principal issue for decision is whether it was an abuse            
          of respondent's discretion to require petitioner to change from             
          the cash method of accounting to the accrual method of                      
          accounting.  Subsumed in this issue is the question of whether              


               2    Although the statutory notice of deficiency in the                
          instant case covered 1987, 1988, 1990, 1991, and 1993, respondent           
          did not change petitioner's method of accounting for 1987 and               
          1988.                                                                       




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