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decided before and after 1970. Before 1970, courts were mostly
left to their own devices to resolve whether an accounting
adjustment rose to the level of a change in method of accounting.
In 1970, paragraphs (e)(2) and (3) of section 1.446-1(e), Income
Tax Regs., were revised by Treasury Decision. See T.D. 7073, 1970-
2 C.B. 98 (the 1970 revision). Included in those revisions were
the following: The addition of the language found in paragraph
(e)(2)(ii)(a) of section 1.446-1(e), Income Tax Regs., to the
effect that, although a pattern of consistent treatment is not
necessary to establish a method of accounting for an item, “in most
instances a method of accounting is not established for an item
without such consistent treatment.” Id. at 99. The term “material
item” (also found in paragraph (e)(2)(ii)(a)) which, before the
1970 revision, was unqualified, was redefined with the following
qualification: “A material item is any item which involves the
proper time for the inclusion of the item in income or the taking
of a deduction.” Id. The rules of exclusion, found in section
1.446-1(e)(2)(ii)(b), Income Tax Regs., that a change in method of
accounting includes neither mathematical or posting errors nor the
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, were added. Petitioners do not
challenge the validity of section 1.446-1(e)(2), Income Tax Regs.
(1970).
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