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expenses on petitioner’s returns for the years in issue was
required to be capitalized. Petitioner also relies on the fact
that, during the examination, it filed a claim for approximately
$21 million in additional repair expenses for the year 1992 of
which respondent’s agents allowed approximately $10.9 million as
additional repair expenses.
Respondent has never notified petitioner that he was
changing petitioner’s method of accounting, and respondent denies
that any of the aforementioned actions taken during the
examination had that effect. Indeed, in petitioner’s memorandum
in opposition to respondent’s previous motion for partial summary
judgment, which we granted, petitioner stated:
When seeking to capitalize repair expenses deducted by
Petitioner, at no time did Respondent assert that he
was changing Petitioner’s method of accounting or that
he had determined that Petitioner’s method did not
clearly reflect income as required under Section 446 of
the Code in order to require such a change. * * *
In its reply brief to respondent’s previous motion, petitioner
also stated: “At no time did Respondent’s agents propose a
‘change in method of accounting’ when proposing to disallow
repair expense for tax purposes”.
In its memorandum in opposition to respondent’s previous
motion for partial summary judgment, petitioner claimed that it
was using the “method of accounting” required by section 1.162-4,
Income Tax Regs., and that the amounts classified as repair
expenses for FERC/FPSC regulatory and financial reporting
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