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After filing the amended returns for prior years, petitioner
filed original Forms 1120 for the years ended in April of 1996
and April of 1997. On these returns, the gas stations were
classified and depreciated as 15-year property. Petitioner at no
time filed a Form 3115, Application for Change in Method of
Accounting, with respect to the gas station properties.
Respondent subsequently examined petitioner’s returns for
the tax years ended in 1996 and 1997 and issued a notice of
deficiency with respect to those years on December 8, 1998.
Therein, respondent determined, among other things, that
petitioner’s deductions for depreciation must be decreased
because petitioner, in treating the gas stations as 15-year
property, had engaged in a change of accounting method without
the consent of the Commissioner. Respondent computed the amount
of such decreases in depreciation expense as being $302,101 and
$257,833 for the years ended in 1996 and 1997, respectively. The
corresponding increases in taxable income resulted in
deficiencies that are the subject of this litigation.
Discussion
I. General Rules
A. Accounting Methods
As a threshold premise, section 446(a) sets forth the
general rule that “Taxable income shall be computed under the
method of accounting on the basis of which the taxpayer regularly
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