-167- correct this problem. The Court held that this correction was a change in the method of accounting that, under section 481, required the taxpayer to recapture in income the cost of items mistakenly written off in prior years. Id. at 513. In Primo Pants Co. v. Commissioner, supra, the taxpayer consistently valued its inventories as a percentage of cost when its inventories should have been valued at full cost. The Court held that deferral of income until final closing inventory was corrected was a timing question that constituted a change in accounting method. Id. at 725; accord Dearborn Gage Co. v. Commissioner, 48 T.C. 190, 197-198 (1967) (concluding that the exclusion of overhead costs in valuing inventory is an erroneous method of accounting involving a material item); Hitachi Sales Corp. of Am. v. Commissioner, T.C. Memo. 1994-159 (a change from an improper method of valuing inventory to a proper valuation method is a change in method of accounting), supplemented T.C. Memo. 1995-84. We find in the legislative history under section 475 further support for our conclusion that the instant issue involves a method of accounting. That history, although considered to be secondary when interpreting the statutory text, is most useful when it comes to discerning a statute’s intended purpose. Bob Jones Univ. v. United States, 461 U.S. 574, 586 (1983); Albertson’s, Inc. v. Commissioner, 42 F.3d 537, 541 (9th Cir.Page: Previous 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 Next
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