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Cf. Commissioner v. Idaho Power Co., 418 U.S. 1, 14-15 (1974)
(where a taxpayer’s generally accepted method of accounting is
made compulsory by a regulatory agency and that method clearly
reflects income, it is almost presumptively controlling for
Federal tax purposes); Sprint Corp. v. Commissioner, 108 T.C.
384, 403-404 (1997).
Petitioner contends that we have sanctioned the use of a
minimum expensing rule, citing Galazin v. Commissioner, T.C.
Memo. 1979-206, in which we allowed the taxpayer to deduct the
cost of a calculator due to the small amount of the expenditure
($52.45) and the relatively short (2-year) useful life of the
asset. Here, respondent disallowed deductions of $467,944 and
$351,543 for the disputed items. These amounts are not
comparable to the amount at issue in Galazin. Cf. Sharon v.
Commissioner, 66 T.C. 515, 527 (1976) (taxpayer must capitalize
$801 bar examination fees and expenses to practice law in
California because amount was too large to disregard its capital
nature), affd. 591 F.2d 1273 (9th Cir. 1978).
We conclude that petitioner has not shown that its
accounting method clearly reflected income nor that it was an
abuse of discretion for respondent to require petitioner to
change that method of accounting. Thus, we hold that petitioner
may not expense the cost of its assets that cost less than $500
and that have a useful life greater than 1 year.
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