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a $42,400 accrued liability to GMAC. When GMAC actually lent the
funds to the fleet customer and GM made the $42,400 fleet rate
support payment to GMAC, GM eliminated the $42,400 accrued
liability and recorded a cash reduction of $42,400. The net
effect on GM's income statement was a $42,400 sales allowance;
the net effect on GM's balance sheet was a $42,400 reduction in
GM's cash balance.
II. Change in Method of Accounting
Respondent's primary argument is that the consolidated
return regulations constituted a method of accounting, and the GM
group's consistent deferral of GM's rate support deduction prior
to 1985 established the regular method of accounting for the rate
support payments.25 See sec. 1.446-1(e)(2)(ii)(a), Income Tax
Regs. Respondent contends that in 1985 the GM group26 changed
its method of accounting when (1) the GM group stopped reporting
GM's rate support payments as intercompany transactions under
section 1.1502-13(a)(1), Income Tax Regs., (2) GM continued to
claim the rate support payments as current deductions when paid
25 We use the term "rate support payments" to refer to both
the retail rate support payments and fleet rate support payments.
26 On brief, respondent argues that "GM" changed its method
of accounting. Most of respondent's arguments, however, pertain
to changes made by the GM group on its consolidated returns.
Therefore, we believe that many of respondent's references to GM
in respondent's discussion of the change in method of accounting
issue are references to the GM group.
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