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items at issue. In each case, the character of the items
was changed from taxable to nontaxable, and the taxpayer’s
lifetime taxable income was affected. In each case, the
Court held that the change was not a change in the
taxpayer’s method of accounting.
The change in characterization in the instant case,
on the other hand, does not involve the same kind of
recharacterization that was involved in either Underhill or
Coulter Elecs., Inc. In this case, the overburden removal
costs are deductible whether they are treated as mine
development expenses or production costs. The change in
characterization affects only whether the overburden
removal costs are treated as an income offset or are
amortized over 5 years. This is clearly a timing issue.
Petitioner’s lifetime taxable income is not affected.
Petitioner refers to the following statement made by
the Court in Tex. Instruments, Inc., & Consol. Subs. v.
Commissioner, supra:
We therefore conclude that, to the extent that
petitioner was required to allocate those costs
to its long-term contracts to comply with the
regulations, respondent’s proposed adjustments
would not constitute a change in petitioner’s
method of accounting for those items within the
meaning of section 1.446-1(e)(2)(ii), Income Tax
Regs.
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