Sunoco, Inc. and Subsidiaries - Page 26

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             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                 

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