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Petitioner sold seeds, fertilizer, and other supplies to
farmers during the years in issue. Petitioner's owner provided
advice and some financial assistance to petitioner's customers.
The issue for decision is whether respondent committed an abuse
of discretion in determining that petitioner must use the accrual
method of accounting during the years in issue. To decide this,
we must decide:
1. Whether petitioner's purchase and sale of merchandise
was a material income-producing factor in 1990 and 1992. We hold
that it was.
2. Whether petitioner qualifies as a farmer for purposes
of using the cash method of accounting for 1990 and 1992. We
hold that it does not.
3. Whether respondent's determination was an abuse of
discretion because, in determining that petitioner's use of the
cash method did not clearly reflect income, respondent compared
only 3 years of petitioner's income under the cash and accrual
methods of accounting. We hold that respondent need not have
considered more than the 3 years in issue.
Thus, we hold that petitioner must use inventories and the
accrual method of accounting for 1990 and 1992.
1(...continued)
method of accounting for 1990, 1991, and 1992 and that petitioner
had a deficiency in income tax for 1990 and 1992. Respondent
determined that petitioner overpaid tax for 1991.
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