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(9th Cir. 1995). In German, we explained the relationship
between sections 481 and 6501 as follows:
While respondent may be precluded by the statute of
limitations from determining deficiencies in income tax
for some of the prior years, section 481 authorizes an
adjustment to income for the * * * [open] taxable year
for the amount * * * erroneously deducted under * * *
[petitioner's] accounting practice during closed years.
* * * It is not meant to provide a means to correct
errors of past years, but rather is intended to take
into account in the year of change * * * those
adjustments which are necessary solely by reason of the
change in accounting method in order to prevent amounts
from being duplicated or omitted. [Citations omitted.]
As explained in Graff Chevrolet Co. v. Campbell, supra at
572, section 481 confers on respondent "ample power to change
accounting methods and reassess income for open years; section
481 would be virtually useless if it did not affect closed
years."
Respondent contends that the section 481 adjustment does not
constitute an adjustment to petitioner's income for 1992, a
closed year, but rather that it constitutes an adjustment to
petitioner's income for 1993, an open year. We agree with
respondent.
Respondent's section 481 adjustment for 1993 did not effect
a change in petitioner's 1992 taxable income. The change in
petitioner's method of accounting for franchise tax beginning for
1993 caused petitioner to deduct the same $14,000 amount twice.
Respondent's section 481 adjustment for 1993 was necessary to
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