- 94 -
income’ pursuant to the provisions of section 446.
* * *
Id. at 283–284.
In Fort Howard Paper Co., we found the taxpayer’s method of
accounting clearly to reflect income notwithstanding that the
taxpayer allocated no overhead to self-constructed property under
the “incremental cost” method of accounting adopted by him. The
Commissioner argued for the “full absorption cost” method, which
would have required an allocation of overhead to self-constructed
assets. We stated:
Under all the circumstances herein, we hold that
petitioner has satisfied its heavy burden and has
convinced us that it employed a generally accepted
method of accounting which ‘clearly reflects its
income.’ In so doing, we neither hold nor imply that,
under all circumstances, a taxpayer has a right to
choose between alternative generally accepted methods
of accounting or that respondent may not, under some
circumstances, require a taxpayer to accept his
determination as to a preferred selection among such
alternatives. We hold merely that where a taxpayer, in
a complicated area such as is involved herein, has over
a long period of time consistently applied a generally
accepted accounting method (which is considered
‘clearly to reflect’ income by competent professional
authority and is not specifically in derogation of any
provision of the Internal Revenue Code) and where this
method has been frequently applied by respondent in
making adjustments to the taxable income of the same
taxpayer (as distinguished from respondent’s mere
failure to object to its use by such taxpayer), the
taxpayer’s choice of method will not be disturbed.
* * *
Id. at 286–287 (citations omitted). In Coors v. Commissioner,
60 T.C. 368, 397 (1973), affd. 519 F.2d 1280 (10th Cir. 1975), we
distinguished Fort Howard Paper Co. and found the taxpayer’s
Page: Previous 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 NextLast modified: May 25, 2011