- 32 -
respondent simply reviewed petitioner’s claim and allowed an
additional deduction based on the circumstances. Petitioner has
not alleged any action on respondent’s part which could be
construed as approving the method of accounting petitioner is
currently claiming for the expenditures in issue. It is
undisputed that petitioner never filed a Form 3115 to request a
change in accounting method. See sec. 1.446-1(e)(3)(i), Income
Tax Regs. Accordingly, petitioner did not obtain respondent’s
consent to recharacterize the expenditures in issue.
IV. Purpose of Section 446(e)
The policy underlying section 446(e) was enunciated in
Pacific Natl. Co. v. Welch, 304 U.S. 191, 194 (1938):
Change from one method to the other, as petitioner
seeks, would require recomputation and readjustment of
tax liability for subsequent years and impose
burdensome uncertainties upon the administration of the
revenue laws. It would operate to enlarge the
statutory period for filing returns * * * to include
the period allowed for recovering overpayments * * * .
There is nothing to suggest that Congress intended to
permit a taxpayer, after expiration of the time within
which return is to be made, to have his tax liability
computed and settled according to the other method.
* * * [11]
11Since the amendment of the consent requirement in 1954,
this passage has been endorsed as an appropriate statement of the
policy rationale of sec. 446(e). See Lord v. United States, 296
F.2d 333, 335 (9th Cir. 1961) (“If * * * [taxpayers] were allowed
to report income in one manner and then freely change to some
other manner, the resulting confusion would be exactly that which
was to be alleviated by requiring permission to change accounting
methods”); see also Southern Pacific Transp. Co. v. Commissioner,
supra at 686-687 (endorsing and restating the policies
articulated by Pacific Natl. Co. v. Welch, 304 U.S. 191 (1938),
(continued...)
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