- 8 - 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.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011