- 12 -
identity of results test in order to show that the
Commissioner's determination, requiring it to change from the
cash method to the accrual method of accounting, was an abuse
of discretion.
The Court of Appeals in Wilkinson-Beane, Inc. v.
Commissioner, 420 F.2d at 356, explained that the substantial
identity of results test is a “rigorous standard [that] may
occasionally work a harsh result” and that “the standard * * *
[the taxpayer] must satisfy is extremely high.” Id. at 356-
357. In Wilkinson-Beane, Inc., the taxpayer failed to
demonstrate that the cash method of accounting and accrual
method of accounting produced substantial identity of results
where differences in gross income resulting from the different
methods were $2,094.80 and $4,009.76, respectively, during the
years in issue. The court went on to state that “it must be
borne in mind that regardless of the accuracy of taxpayer’s
cash method in the past, there is no guarantee that the
stability of sales, costs, collections and other factors which
make for that result will continue in the future.” Id.; see
also Ralston Dev. Corp. v. United States, 937 F.2d 510, 513
(10th Cir. 1991) (cash and accrual methods did not achieve
substantial identity of results where use of the accrual method
increased gross income by $715,515 (157 percent), $467,284 (36
percent), and $739,581 (48 percent)); Tebarco Mech. Corp. v.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011