- 12 -
In administering section 446, the Commissioner has broad
powers to determine whether an accounting method used by a
taxpayer clearly reflects income. See Commissioner v. Hansen,
360 U.S. 446, 467 (1959). Generally, courts do not interfere
with the Commissioner's determination unless it is an abuse of
discretion. See Thor Power Tool Co. v. Commissioner, 439 U.S.
522, 532 (1979); Lucas v. American Code Co., 280 U.S. 445, 449
(1930); Ford Motor Co. v. Commissioner, 102 T.C. 87, 92 (1994),
affd. 71 F.3d 209 (6th Cir. 1995). Whether an abuse of
discretion exists is a question of fact. See Rodebaugh v.
Commissioner, 518 F.2d 73, 75 (6th Cir. 1975), affg. T.C. Memo.
1974-36. The taxpayer bears the burden of proving an abuse of
discretion by the Commissioner. See Asphalt Prods. Co. v.
Commissioner, 796 F.2d 843, 848 (6th Cir. 1986), affg. on this
issue and revg. on another issue Akers v. Commissioner, T.C.
Memo. 1984-208, revd. on another issue 482 U.S. 117 (1987).
However, the Commissioner cannot require a taxpayer to change
from an accounting method that clearly reflects income to an
alternative method of accounting merely because the Commissioner
considers the alternative method to more clearly reflect the
taxpayer's income. See Ansley-Sheppard-Burgess Co. v.
Commissioner, 104 T.C. 367, 371 (1995).
If a taxpayer must use inventories, the Commissioner has
broad latitude pursuant to section 471 and the regulations
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