Nemetschek North America, Inc. - Page 8

                                        - 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.                                                     





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011