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taxpayer had elected to deduct intangible drilling costs
(IDC), pursuant to section 1.612-4, Income Tax Regs., but
had capitalized and amortized, over the lives of the
assets, certain IDC. We rejected the Commissioner’s
assertion that the taxpayer’s attempt to deduct that IDC in
the taxable years at issue was a change in its method of
accounting that required the Commissioner’s consent
because:
If the election [to deduct IDC] is made, all
IDC must be deducted. Petitioner’s tardy
assertion that the “other” costs in issue should
have been deducted does not * * * constitute a
discretionary choice that such costs should be
deducted. It is a discovery that petitioner
failed to deduct costs which, under the
accounting method it has chosen, had to be
deducted. [Standard Oil Co. (Indiana) v.
Commissioner, 77 T.C. at 382-383.]
We held that section 446(e) did not apply, but we added the
following caveat:
We do not mean to suggest that section 446(e)
would necessarily be inapplicable in the
situation where a taxpayer has previously
capitalized all IDC and then seeks to deduct
such costs under section 263(c) without
respondent’s consent. [Id. at 383-384.]
We believe that the change petitioner proposed is
different from the “correction of internal inconsistencies”
necessitated by the “discovery” of the taxpayer’s failure
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