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account or from independent funds. When the taxpayer terminated
his agreement and all outstanding bonds were satisfied, the
taxpayer would be entitled to the funds in the BUF account. The
taxpayer deducted deposits into the BUF account as a portion of
cost of goods sold. See Rankin v. Commissioner, supra.
The parties in Rankin agreed that the taxpayer was not
permitted to deduct deposits into the BUF account.8 The parties
disagreed over the treatment of the amounts accumulated in the
BUF account prior to the years in issue. In an attempt to avoid
the application of section 481, the taxpayer argued that the
change in treatment of the deposits into the BUF account that the
Commissioner was requiring was not a change in method of
accounting. We held that it was, because the change affected
only the timing of inclusion, not the ultimate fact of inclusion.
See id.; see also Schuster’s Express, Inc. v. Commissioner, 66
T.C. 588, 596-597 (1976), affd. without published opinion 562
F.2d 39 (2d Cir. 1977); sec. 1.446-1(e)(2)(ii)(b), Income Tax
Regs. (“a change in method of accounting does not include
adjustment of any item of income or deduction which does not
8 The parties relied on Sebring v. Commissioner, 93 T.C. 220
(1989), an earlier case with virtually identical facts. The
issue in Sebring was whether a cash basis bail bondsman could
properly deduct deposits into a BUF account at the time of
deposit. We held that he could not deduct amounts when they were
deposited, even though the deposits were mandatory. See id. at
227.
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