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fact. See Ansley-Sheppard-Burgess Co. v. Commissioner, supra at
371; Ford Motor Co. v. Commissioner, 102 T.C. 87, 91-92, affd. 71
F.3d 209 (6th Cir. 1995). The reviewing court's task is not to
determine whether, in its own opinion, the taxpayer's method of
accounting clearly reflects income but to determine whether there
is an adequate basis in law for the Commissioner's conclusion
that it does not. See Ansley-Sheppard-Burgess Co. v.
Commissioner, supra at 371. Consequently, to prevail, a taxpayer
must prove that the Commissioner’s determination is arbitrary,
capricious, or without sound basis in fact or law. See Ansley-
Sheppard-Burgess Co. v. Commissioner, supra at 371; Ford Motor
Co., supra at 92.
To resolve this dispute, we consider sections 446 and 471
and the regulations thereunder. Under section 446(a), a taxpayer
computes taxable income based on the method of accounting
utilized by the taxpayer in keeping its books. Section 446(c)
describes the various accounting methods that a taxpayer may use
in computing taxable income, including the cash and accrual
methods.
Section 1.446-1(c)(2)(i), Income Tax Regs., provides that a
taxpayer who is required to use inventories must also use the
accrual method of accounting with regard to purchases and sales.
Under section 471 and section 1.471-1, Income Tax Regs., a
taxpayer must account for inventories if the production,
purchase, or sale of merchandise is an income-producing factor in
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