Ronald D. and Paula J. Pittman, et al. - Page 11




                                       - 11 -                                         
          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.                                                        








Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  Next

Last modified: May 25, 2011