Green Forest Manufacturing Inc. - Page 8




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               Regulations also detail certain types of adjustments, with             
          examples thereof, that are specifically excluded from                       
          characterization as changes in method of accounting:                        
                    A change in method of accounting does not include                 
               correction of mathematical or posting errors, or errors                
               in the computation of tax liability * * *.  Also, a                    
               change in method of accounting does not include                        
               adjustment of any item of income or deduction which                    
               does not involve the proper time for the inclusion of                  
               the item of income or the taking of a deduction.  For                  
               example, corrections of items that are deducted as                     
               interest or salary, but which are in fact payments of                  
               dividends, and of items that are deducted as business                  
               expenses, but which are in fact personal expenses, are                 
               not changes in method of accounting.  In addition, a                   
               change in the method of accounting does not include an                 
               adjustment with respect to the addition to a reserve                   
               for bad debts or an adjustment in the useful life of a                 
               depreciable asset.  Although such adjustments may                      
               involve the question of the proper time for the taking                 
               of a deduction, such items are traditionally corrected                 
               by adjustments in the current and future years. * * *                  
               [Sec. 1.446-1(e)(2)(ii)(b), Income Tax Regs.]                          
               Thus, even though an adjustment in the useful life of a                
          depreciable asset may involve the question of the proper time for           
          the taking of a deduction, such an item is includable among those           
          that are traditionally corrected by adjustments in the current              
          and future years, and a change in accounting method is not                  
          involved.  The regulation is totally consistent with the language           
          of section 481(a)(2) because the useful life adjustment is not a            
          change “necessary * * * to prevent amounts from being duplicated            
          or omitted”.  Therefore, section 481(a) is not implicated so as             
          to require an adjustment thereunder.                                        







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Last modified: May 25, 2011