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so compelling petitioner if purchases and sales of inventory are
not involved. Section 446(c) specifically permits a taxpayer to
compute taxable income under the cash method; nevertheless, that
permission is made subject to the Secretary’s section 446(b)
authority to reject the taxpayer’s method of accounting. See
sec. 446(c). By the pleadings, however, the parties have limited
what petitioner must prove to stay on the cash method.
Above, in section II., I have set forth both respondent’s
explanation of the net adjustment and his allegation, in response
to petitioner’s averment that it is entitled to use the cash
method, that “petitioner is required to maintain inventories and,
therefore, is required to use the accrual method for the purchase
and sale of inventories.” (Emphasis added.) Correctly, the
majority thinks that a fair reading of the issue for trial in
this case, as framed by the pleadings, is whether petitioner is
required to maintain inventories. I agree with the limited scope
of the majority’s inquiry, in this case. I do not agree,
however, that petitioner need not use inventories.
2. Inventories Are Required
As set forth in section III., supra, regulations provide:
(1) Inventories are necessary in every case in which the sale of
merchandise is an income-producing factor, and (2) with limited
exceptions, in any case in which it is necessary to use an
inventory, an accrual method must be used with regard to purchase
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