Von Euw & L.J. Nunes Trucking, Inc. - Page 6

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          $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.                                                               
               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.                               

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