- 30 -
Respondent contends that petitioner ignores the following
parenthetical language in paragraph 3(c)(2)(ii): “(or would
require an adjustment under section 481(a) if the taxpayer
changed to the method of accounting for which relief is requested
in a taxable year subsequent to the taxable year the election
should have been made)”. Respondent contends that the
parenthetical language presumes prejudice to the Government
because petitioner, hypothetically, could have adopted the mark-
to-market method of accounting in a year subsequent to the year
he should have adopted the mark-to-market method and a section
481(a) adjustment might possibly be necessary.
Assuming arguendo that the parenthetical phrase in paragraph
3(c)(2)(ii) did apply, the interests of the Government are not
deemed to be prejudiced if unusual and compelling circumstances
18(...continued)
Election not requiring adjustment under section 481(a).
Taxpayer D prepares D’s 1997 income tax return. D is
unaware that a particular accounting method regulatory
election is available. D files D’s 1997 return without
making the election and uses another permissible method
of accounting. The applicable regulation provides that
the election is made on a cut-off basis (without an
adjustment under sec. 481(a)). In 1998, D requests
relief under this section to make the election under
the regulation. If D were granted an extension of time
to make the election, D would pay no less tax than if
the election had been timely made. Assume that
paragraphs (c)(2)(i), (iii), and (iv) of this sec. do
not apply. Under paragraph (c)(2)(ii) of this section,
the interests of the Government are not deemed to be
prejudiced because the election does not require an
adjustment under section 481(a).
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