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nondepreciable inventory to depreciable property is a
change in method of accounting); FPL Group, Inc. v.
Commissioner, 115 T.C. 554 (2000) (a change from
capitalizing and depreciating the costs of a group of
depreciable assets to expensing them involves a change
in the treatment of a material item and is, therefore, an
impermissible change in method of accounting); Pac. Enters.
v. Commissioner, 101 T.C. 1 (1993) (a change from “working
gas” (inventory) to “cushion gas” (capital asset) is a
change in method of accounting); Standard Oil Co. (Indiana)
v. Commissioner, 77 T.C. at 410 (a change in depreciation
method resulting from a change from section 1250 property
to section 1245 property is a change in method of
accounting).
Finally, the regulations detail certain situations
that are not considered changes in method of accounting.
Section 1.446-1(e)(2)(ii)(b), Income Tax Regs., provides:
A change in method of accounting does not include
correction of mathematical or posting errors, or
errors in the computation of tax liability (such
as errors in computation of the foreign tax
credit, net operating loss, percentage depletion
or investment credit). 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
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