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books, he generally may not change to a new method of accounting
to compute taxable income without the consent of the Secretary.
Sec. 446(e). “Consent must be secured whether or not such method
is proper or is permitted under the Internal Revenue Code or the
regulations thereunder.” Sec. 1.446-1(e)(2)(i), Income Tax Regs.
A change in the treatment of any material item in an overall
plan of accounting constitutes a change in method of accounting.
Sec. 1.446-1(e)(2)(ii)(a), Income Tax Regs. A “material item” is
defined to include “any item which involves the proper time for
the inclusion of the item in income”. Id. Thus, an item is a
material item if its change affects only the timing of the
recognition of income while leaving lifetime taxable income
unchanged. Schuster’s Express, Inc. v. Commissioner, 66 T.C.
588, 597 (1976), affd. without published opinion 562 F.2d 39 (2d
Cir. 1977). On the other hand, a change in method of accounting
does not include “correction of mathematical or posting errors,
or errors in the computation of tax liability”. Sec. 1.446-
1(e)(2)(ii)(b), Income Tax Regs.
The customer downpayments in this case clearly constitute a
material item: BMP’s change from recognizing the income upon
receipt to recognizing the income upon the performance of the
services is nothing more than a change in the timing of the
recognition of the income; BMP’s aggregate lifetime taxable
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