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computes his income in keeping his books.” Section 446(e) then
provides the particular standard governing changes in accounting
method and reads as follows:
SEC. 446(e). Requirement Respecting Change of
Accounting Method.--Except as otherwise expressly
provided in this chapter, a taxpayer who changes the
method of accounting on the basis of which he regularly
computes his income in keeping his books shall, before
computing his taxable income under the new method,
secure the consent of the Secretary.
In addition, regulations promulgated under section 446 further
clarify the operation of these statutory mandates:
Requirement respecting the adoption or change of
accounting method. (1) A taxpayer filing his first
return may adopt any permissible method of accounting
in computing taxable income for the taxable year
covered by such return. * * *
(2)(i) Except as otherwise expressly provided in
chapter 1 of the Code and the regulations thereunder, a
taxpayer who changes the method of accounting employed
in keeping his books shall, before computing his income
upon such new method for purposes of taxation, secure
the consent of the Commissioner. Consent must be
secured whether or not such method is proper or is
permitted under the Internal Revenue Code or the
regulations thereunder. [Sec. 1.446-1(e)(1) and
(2)(i), Income Tax Regs.]
For purposes of the foregoing rules, a change in accounting
method “includes a change in the overall plan of accounting for
gross income or deductions or a change in the treatment of any
material item used in such overall plan.” Sec. 1.446-
1(e)(2)(ii)(a), Income Tax Regs. A material item, in turn, “is
any item which involves the proper time for the inclusion of the
item in income or the taking of a deduction.” Id.
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Last modified: May 25, 2011