Sunoco, Inc. and Subsidiaries - Page 28

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             this case involves a change in the treatment of a material               
             item; that is, “any item which involves the proper time for              
             the inclusion of the item in income or the taking of a                   
             deduction.”  Sec. 1.446-1(e)(2)(ii)(a), Income Tax Regs.                 
             According to respondent, in determining whether an                       
             accounting practice for an item involves timing, “the                    
             relevant question is whether the practice permanently                    
             changes the taxpayer’s lifetime income.”                                 
                  Respondent argues that the change in petitioner’s                   
             treatment of Cordero’s overburden removal costs involves                 
             timing.  The change is from development costs that are                   
             deductible under section 616(a) but subject to partial                   
             capitalization and amortization under section 291(b), to                 
             production costs that can be offset against income without               
             limitation.  Respondent argues that this change affects the              
             tax years in which the deductions are reported over the                  
             life of the mine and does not affect petitioner’s lifetime               
             income.  Therefore, respondent argues, the change involves               
             a material item under section 1.446-1(e)(2)(ii)(a), Income               
             Tax Regs., and is a change of accounting method because the              
             effect of the change would be to alter the timing of                     
             deductions for overburden removal costs.                                 
                  Respondent argues that the change goes beyond a mere                
             correction of a posting error or an attempt to remedy                    

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Last modified: May 25, 2011