- 11 -
section generally prohibits a C corporation from using the cash
method. Sec. 448(a)(1). Although section 448(b)(3) provides an
exception to this prohibition in the case of a C corporation that
satisfies the $5 million gross receipts test of section
448(c)(1), we read nothing in section 448 that provides that a C
corporation may use the cash method merely because it meets that
exception. In fact, section 1.448-1T(c), Temporary Income Tax
Regs., 52 Fed. Reg. 22767 (June 16, 1987), explains clearly the
effect of section 448 on section 446(b). That section states:
nothing in section 448 affects the authority
of the Commissioner under section 446(b) to
require the use of an accounting method that
clearly reflects income * * *. For example, a
taxpayer using the cash method may be required
to change to an accrual method of accounting
under section 446(b) because such method
clearly reflects that taxpayer’s income, even
though the taxpayer is not prohibited by
section 448 from using the cash method. * * *
Petitioner also asserts that Diehl did not sell merchandise
that was an income-producing factor in its business. We
disagree. The term “merchandise” includes any item held for
sale. Osteopathic Med. Oncology & Hematology, P.C. v.
Commissioner, 113 T.C. 376, 382-383 (1999); see also Wilkinson-
Beane, Inc. v. Commissioner, 420 F.2d 352, 354-355 (1st Cir.
3(...continued)
more than $5,000,000.--Paragraphs (1) and (2)
of subsection (a) shall not apply to any
corporation or partnership for any taxable
year if, for all prior taxable years
beginning after December 31, 1985, such
entity met the $5,000,000 gross receipts test
* * *.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011