- 42 -
accrual method because it was in a service business and because
it had no inventories. The majority’s limited focus represents
only a portion of the standard to be considered in order to
decide this issue. Petitioner’s burden (heavier than normal) is
to show that respondent’s determination is in error; i.e., that
respondent abused his discretion by determining that petitioner’s
method does not clearly reflect income. Petitioner cannot carry
that burden by the simple expedient of contending that the
materials it uses to produce finished sidewalks, driveways, and
foundations should be labeled as supplies consumed. It must also
show that its method of accounting clearly reflected income and
that respondent’s determination was clearly unlawful or plainly
arbitrary. Based on the facts of this case, petitioner has
failed to carry its burden.
Ultimate Factual Conclusions by the Majority1
The majority attempts to persuade us that the materials used
by petitioner, which represented two-thirds of the total cost,
were incidental to and absorbed in the performance of services
(labor), which represented one-third of the cost. The majority
1 As the trial Judge (finder of fact) in a factually
oriented case, I am placed in the difficult and unpleasant
position of providing, in the context of a dissenting opinion, my
factual perspective. Two critical factual inquiries are
presented by the issues: (1) Whether petitioner has shown that
respondent abused his discretion, and (2) whether petitioner
produced or sold merchandise and/or had ending inventory. I
disagree with the majority’s ultimate findings of fact, and, to
some degree, the standard employed. Each of these matters is
separately addressed in this dissent.
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011