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the sand and gravel.
Because we hold that the sand and gravel is merchandise
which is an income-producing factor in petitioner’s business and
that petitioner acquires title to the sand and gravel, petitioner
must maintain inventories. Pursuant to section 1.446-1(c)(2)(i),
Income Tax Regs., petitioner would therefore have to report its
taxable income on the accrual method of accounting unless an
exception applies. A taxpayer demonstrating a substantial
identity of results between the taxpayer’s method of accounting
and the method of accounting selected by the Commissioner may
compute taxable income under its method of accounting. See
Wilkinson-Beane, Inc. v. Commissioner, 420 F.2d 352, 356 (1st
Cir. 1970), affg. T.C. Memo. 1969-79. On brief, petitioner
concedes that it does not meet the substantial identity of
results test. We, therefore, hold that respondent did not abuse
his discretion under section 446 when respondent required
petitioner to compute its taxable income based on the accrual
method of accounting.
In reaching all our holdings herein, we have considered all
arguments made by the parties, and, to the extent not mentioned
above, we find them to be irrelevant or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.
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