- 13 -
constituted merchandise in the context of whether the accrual
method must be used was an issue of first impression on which no
court had ruled until we filed our opinion in Osteopathic Med.
Oncology & Hematology, P.C. v. Commissioner, supra. The
Commissioner generally is not subject to an award of litigation
costs under section 7430 where the underlying issue presents a
question of first impression. See TKB Intl., Inc. v. United
States, 995 F.2d 1460, 1468 (9th Cir. 1993); Estate of Wall v.
Commissioner, 102 T.C. 391 (1994). Moreover, the Commissioner
has been granted considerable discretion, by statute, to
determine whether a method of accounting clearly reflects income.
See sec. 446; Don Casey Co. v. Commissioner, 87 T.C. 847, 862
(1986). Before our decision in Osteopathic Med. Oncology &
Hematology, P.C., Wilkinson-Beane, Inc. v. Commissioner, supra,
and its progeny provided at least a colorable factual and legal
basis for the Commissioner’s conclusion that drugs used in
treating patients constituted merchandise, thereby requiring
petitioners to use the accrual method.5
5The earlier determination made by a revenue agent, that the
cash method should have been used by Mid-Del on its 1993 Federal
income tax return, has no bearing on the decision that the
position taken by respondent at trial was substantially
justified. Although a presumption of unreasonableness exists if
the Commissioner argues a position in the administrative
proceeding that is contrary to any applicable published guidance
of the Commissioner, an initial determination by a revenue agent
does not qualify as guidance that leads to such a presumption.
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011