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reason of the change in order to prevent amounts from being
duplicated or omitted”. Sec. 481(a)(2). If there has been a
change in method of accounting, then section 481(a) applies and
adjustments are made thereunder to prevent the omission or
duplication of taxable income caused solely by the change in
method of accounting. If there has not been a change in method
of accounting, then no adjustment pursuant to section 481(a) is
made.
A change in method of accounting to which section 481(a)
applies includes “a change in the overall method of accounting
for gross income or deductions, or a change in the treatment of a
material item.” Sec. 1.481-1(a)(1), Income Tax Regs.
Regulations promulgated under section 481(a) incorporate the
rules of section 446(e) and section 1.446-1(e), Income Tax Regs.,
for determining when a change in method of accounting has
occurred. Sec. 1.481-1(a)(1), Income Tax Regs. A change in
method of accounting “includes a change in the overall plan of
accounting for gross income or deductions or a change in the
treatment of any material item used in such overall plan.” Sec.
1.446-1(e)(2)(ii)(a), Income Tax Regs. A material item, in turn,
“is any item which involves the proper time for the inclusion of
the item in income or the taking of a deduction.” Id.
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Last modified: May 25, 2011