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Income Tax Regs. The regulations also contain the
following discussion of changes of accounting method:
A change in the method of accounting includes a
change in the overall plan of accounting for
gross income or deductions or a change in the
treatment of any material item used in such
overall plan. Although a method of accounting
may exist under this definition without the
necessity of a pattern of consistent treatment of
an item, in most instances a method of accounting
is not established for an item without such
consistent treatment. A material item 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.]
In order to determine whether an item is one “which
involves the proper time for the inclusion of the item in
income or the taking of a deduction” and, hence, is a
material item under the above regulation, it is necessary
to determine whether a change in the treatment of that item
will change the taxpayer’s lifetime income or will merely
postpone or accelerate the reporting of income. See, e.g.,
Wayne Bolt & Nut Co. v. Commissioner, 93 T.C. 500, 510
(1989), where the Court stated: “When an accounting
practice merely postpones the reporting of income, rather
than permanently avoiding the reporting of income over
the taxpayer’s lifetime, it involves the proper time
for reporting income.” See Diebold, Inc. v. United States,
891 F.2d 1579, 1583 (Fed. Cir. 1989) (a change from
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