- 6 - $1,867,497. In computing its cost of goods sold, petitioner reported $1,080,774 of “purchases”, $786,723 of “cost of labor”, and no beginning or ending inventories. In addition to its cost of goods sold, petitioner separately deducted its expenses related to the filtering, gathering, and removing of the Byron sand at the Unimin processing plant. As of March 31, 1995, petitioner had accounts receivable of $426,389 and accounts payable of $143,846. In the notice of deficiency, respondent determined that petitioner’s use of the cash method of accounting did not clearly reflect income. Respondent, therefore, changed petitioner’s method of accounting to the accrual method. Further, with regard to the change in accounting method and petitioner’s concessions, respondent made a section 481(a) adjustment and determined a deficiency of $111,114 in petitioner’s tax liability for its 1994 taxable year. OPINION The principal issue for decision is whether respondent abused his discretion by requiring petitioner to change from the cash method to the accrual method of accounting. Subsumed in this issue is the question of whether petitioner should be required to use inventories for tax purposes.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
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