Ward AG Products, Inc. - Page 18

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          factor for petitioner and because petitioner is not a farmer.               
          Tax liability is based on an annual system of accounting; whether           
          cash and accrual methods produce comparable results over a 6-year           
          period is not controlling.  See Knight-Ridder Newspapers, Inc. v.           
          United States, 743 F.2d at 792-793; Lucas v. Kansas City                    
          Structural Steel Co., 281 U.S. 264, 271 (1930).                             
               Petitioner's reliance on Van Raden v. Commissioner, 71 T.C.            
          at 1095-1096, is misplaced because the years chosen for audit               
          were not an issue.  Petitioner has failed to carry the burden of            
          proving that there was an abuse of discretion by respondent.                
          E.   Conclusion                                                             
               We conclude that petitioner does not qualify as a farmer for           
          purposes of using the cash method of accounting and that it must            
          use inventories.  Sec. 448(b)(1); secs. 1.446-1(c)(2)(i), 1.471-            
          1, Income Tax Regs.  We also conclude that it was not an abuse of           
          respondent's discretion to require petitioner to change from the            
          cash method of accounting to the accrual method of accounting for           
          the years in issue.  Thus, petitioner must use the accrual method           
          of accounting.7                                                             

               7 In light of our conclusion that petitioner must use the              
          accrual method of accounting because merchandise is a substantial           
          income-producing factor and because it is not a farmer, our                 
          result is not affected by the fact that:  (1) Petitioner                    
          regularly used the cash method to compute its income, and (2)               
          accrual method documents were only for petitioner's internal                
          review and were not used for any significant purpose.  Petitioner           
          contended that some of its accounts receivable were too                     
          indefinite to be accrued.  However, petitioner did not identify             
          those accounts.                                                             

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