Von Euw & L.J. Nunes Trucking, Inc. - Page 15

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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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