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IC's income. Respondent therefore required IC to use the accrual
method of accounting. Thus, the substantive issue for decision
was whether respondent abused his discretion in requiring IC to
change from the cash/hybrid method of accounting to the accrual
method. "Subsumed in this issue is the question whether * * *
[the taxpayer] should be required to use the inventory method for
tax purposes." J.P. Sheahan Associates, Inc. v. Commissioner,
T.C. Memo. 1992-239. Accordingly, we turn to the applicable Code
provision and case law dealing with this matter.
We begin with section 446. That section provides in
pertinent part as follows:
SEC. 446(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.
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