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any material item. A material item is any item that
involves the proper time for the inclusion of the item
in income or the taking of a deduction. In determining
whether a practice involves the proper time for the
inclusion of an item in income or the taking of a
deduction, the relevant question is generally whether
the practice permanently changes the amount of taxable
income over the taxpayer’s lifetime. If the practice
does not permanently affect the taxpayer’s lifetime
taxable income, but does or could change the taxable
year in which taxable income is reported, it involves
timing and is therefore considered a method of
accounting. See Rev. Proc. 91-31, 1991-1 C.B. 566.
Petitioner argues that the corporation was on the cash
method of accounting and did not change from that for any year,
including 1991. In addition, petitioner contends that in 1989
and 1990 the corporation intended to defer deducting the costs
until such time as it was able to determine whether it met the “2
years or less” test. In that regard, petitioner argues that
exercising the election to deduct or capitalize in section 1.162-
12(a), Income Tax Regs., does not constitute a change in the
accounting method. Petitioner, relying on Wilbur v.
Commissioner, 43 T.C. 322 (1964), contends that the choice
available under the regulation is not a change in the accounting
method. Respondent contends that the holding in Wilbur is
contrary to petitioner’s interpretation.
Wilbur, which was decided prior to the 1969 enactment of
section 278, does not address the question of change of
accounting method, and, accordingly does not support either
party’s argument on that point. See Wilbur v. Commissioner,
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