Osteopathic Medical Oncology and Hematology, P.C. - Page 9




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          to inventory the drugs, and that petitioner was required to use             
          an accrual method to account for this inventory in order to                 
          reflect its income clearly.  Petitioner asserts that it is not a            
          merchandising business but a provider of services; to wit,                  
          chemotherapy treatments for patients stricken with cancer.                  
          Petitioner argues that it need not maintain inventories for the             
          chemotherapy drugs used in the treatments.                                  
               We agree with petitioner that it is not required to                    
          inventory its chemotherapy drugs.  We are mindful of the broad              
          discretion accorded the Commissioner in applying sections 446 and           
          471.  Taxpayers challenging the Commissioner’s authority must               
          prove that the Commissioner’s determination is “clearly unlawful”           
          or “plainly arbitrary”.  See Thor Power Tool Co. v. Commissioner,           
          439 U.S. 522 (1979); see also Wal-Mart Stores, Inc. & Subs. v.              
          Commissioner, T.C. Memo. 1997-1, affd. 153 F.3d 650 (8th Cir.               
          1998).  The fact that the Commissioner has broad authority under            
          section 446(b), however, does not mean that the Commissioner may            
          change a taxpayer’s method of accounting with impunity.  See,               
          e.g., Prabel v. Commissioner, 91 T.C. 1101, 1112-1113 (1988),               
          affd. 882 F.2d 820 (3d Cir. 1989).  The Commissioner, for                   
          example, may not change a taxpayer's method of accounting from              
          one that clearly reflects income to another one that the                    
          Commissioner believes more clearly reflects income.  See                    







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