- 8 - We decide this issue in the context of whether it was an abuse of respondent’s discretion to exercise his authority under section 446 and require petitioner to change from the cash method to a hybrid method.2 Presented is the question of whether petitioner should be required to keep inventories for tax purposes under section 471. Respondent determined that petitioner’s chemotherapy drugs were merchandise that was an income-producing factor, that petitioner therefore was required 2 Sec. 446 provides in pertinent part: SEC. 446. GENERAL RULE FOR METHODS OF ACCOUNTING. (a) General Rule.--Taxable income shall be computed under the method of accounting on the basis of which the taxpayer regularly computes his income in keeping his books. (b) Exceptions.--If no method of accounting has been regularly used by the taxpayer, or if the method used does not clearly reflect income, the computation of taxable income shall be made under such method as, in the opinion of the Secretary, does clearly reflect income. (c) Permissible Methods.--Subject to the provisions of subsections (a) and (b), a taxpayer may compute taxable income under any of the following methods of accounting-- (1) the cash receipts and disbursements method; (2) an accrual method; (3) any other method permitted by this chapter; or (4) any combination of the foregoing methods permitted under regulations prescribed by the Secretary.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011