- 8 -
“clearly unlawful” or “plainly arbitrary”.2 Thor Power Tool Co.
v. Commissioner, supra at 532-533. The Commissioner’s authority
under section 446(b) encompasses overall methods of accounting,
as well as specific methods used to report any item of income or
expense. Thor Power Tool Co. v. Commissioner, supra at 780;
Prabel v. Commissioner, 91 T.C. 1101, 1112-1113 (1988), affd. 882
F.2d 820 (3d Cir. 1989); sec. 1.446-1(a), Income Tax Regs.
The fact that the Commissioner possesses broad authority
under section 446(b) does not mean that the Commissioner can
change a taxpayer’s method of accounting with impunity. See,
e.g., Prabel v. Commissioner, supra at 1112-1113. Thus, for
example, if a taxpayer uses a method of accounting that clearly
reflects income, the Commissioner may not require a change to
another method merely because the Commissioner believes that the
latter method will reflect income more clearly. Ansley-Sheppard-
Burgess Co. v. Commissioner, 104 T.C. 367 (1995); Auburn Packing
Co. v. Commissioner, 60 T.C. 794 (1973); Garth v. Commissioner,
56 T.C. 610 (1971); see also St. James Sugar Coop., Inc. v.
United States, 643 F.2d 1219 (5th Cir. 1981); Photo-Sonics, Inc.
v. Commissioner, 357 F.2d 656, 658 (9th Cir. 1966), affg. 42 T.C.
926 (1964); Bay State Gas Co. v. Commissioner, 75 T.C. 410, 417
(1980), affd. 689 F.2d 1 (1st Cir. 1982). Likewise, we have
2 Petitioner asserts mistakenly that respondent bears the
burden of proving that Diehl’s use of the cash method did not
clearly reflect income.
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