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opening and ending inventory for fiscal year 1982 on the basis of
a complete physical inventory [was] a change in the treatment of
a material item and, therefore, constitutes a change in
accounting method.” Id. at 511; accord Knight-Ridder Newspapers,
Inc. v. United States, supra; Firetag v. Commissioner, T.C. Memo.
1999-355 (the Commissioner’s determination that the taxpayer had
previously used an improper method of accounting which involved a
systematic and consistent treatment of a significant item was not
a computational or posting error but rather a change in his
method of accounting), affd. 232 F.3d 887 (4th Cir. 2000).
The Court of Appeals for the Seventh Circuit, to which this
case is appealable, has decided a substantially similar case. In
Peoples Bank & Trust Co. v. Commissioner, 415 F.2d 1341 (7th Cir.
1969), affg. 50 T.C. 750 (1968), the taxpayer was a calendar
year, overall accrual method bank which paid interest on its
savings accounts. Because of the interplay between when the
taxpayer paid interest and its tax year, for 2 months of the year
the taxpayer calculated its interest expense on the basis of a
“fairly accurate” experience factor, although the interest was
not payable until the following tax year. Like here, the
interest expense failed the “all events test” the Commissioner
corrected the taxpayer’s method, and imposed a section 481(a)
adjustment. This Court agreed with the Commissioner and
sustained his determination finding that the taxpayer’s method of
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