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of the payment–-not the proper method or time of reporting
an item the character of which is not in question.” Id. at
496.
Similarly, in Coulter Elecs., Inc. v. Commissioner,
supra, the Court considered the character of payments
received by the taxpayer from a bank. Initially, the
taxpayer had treated the transfer of certain equipment
leases to the bank as sales, but after audit, the taxpayer
sought to change the treatment from sales to pledges for
loans. Relying on Underhill, the Court found that the
issue in the case was “not one of timing as contemplated
by section 446” but “Instead it [was] a question of
characterization, i.e., whether the transfer by * * * [the
taxpayer] of the leases to * * * [the bank] constituted
sales or pledges for loans.” Coulter Elecs., Inc. v.
Commissioner, supra. The Court quoted the Underhill case
regarding the taxability or nontaxability of a payment and
stated: “Although there is a timing consequence to the
outcome of the characterization, it is automatically
determined by the characterization and no change of
accounting within the meaning of section 446 is involved.”
Id.
The change in characterization in Coulter Elecs., Inc.
and in Underhill determined the taxability of the income
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