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reflects the exercise of the broad discretion of the Commissioner
under section 446(b) to impose a change in petitioner’s method of
accounting.
Section 446 provides:
SEC. 446. GENERAL RULE FOR METHODS OF ACCOUNTING.
(a) General Rule.–-Taxable income shall be
computed under the method of accounting on the basis of
which the taxpayer regularly computes his income in
keeping his books.
(b) Exceptions.–-If no method of accounting has
been regularly used by the taxpayer, or if the method
used does not clearly reflect income, the computation
of taxable income shall be made under such method as,
in the opinion of the Secretary, does clearly reflect
income.
Section 446(b) vests the Commissioner with broad discretion in
determining whether a particular method of accounting clearly
reflects income. See Commissioner v. Hansen, 360 U.S. 446, 467
(1959); Knight-Ridder Newspapers, Inc. v. United States, 743 F.2d
781, 788 (11th Cir. 1984); Ansley-Sheppard-Burgess Co. v.
Commissioner, 104 T.C. 367, 370 (1995); RLC Indus. Co. v.
Commissioner, 98 T.C. 457, 491 (1992), affd. 58 F.3d 413 (9th
Cir. 1995).
In general, a method of accounting clearly reflects income
when it results in accurately reported taxable income under a
recognized method of accounting. RLC Indus. Co. v. Commissioner,
supra at 490. A method of accounting will ordinarily be regarded
as clearly reflecting income when the method reflects the
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