- 26 -
in this case because the first year at issue, 1983, is the
first year that the tax treatment of overburden removal
costs differed from that of production costs. Petitioner
asserts that the periods of limitations for all affected
years are still open. Petitioner argues: “if the
correction can be made in the first year of the change,
there will be no distortion of income, which is the policy
reason for the consent requirement of sec. 446(e).”
Furthermore, petitioner notes that respondent has not
identified a distortion of income that would be brought
about by the change. In fact, according to petitioner,
the change would actually achieve the clear reflection
of petitioner’s income “by reversing the erroneous
capitalization of overburden removal costs” and relating
those costs to the income realized from the coal produced,
as contemplated by Rev. Rul. 77-308, supra, and Rev. Rul.
67-169, supra. Furthermore, petitioner argues: “treating
Cordero’s overburden removal expenses as production costs
on its Federal income tax returns would be consistent with
Cordero’s treatment of overburden removal expenses on its
books and records.”
Respondent’s Position
Respondent’s position is that petitioner cannot change
the treatment of the subject overburden removal costs on
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011