MMC Corp., Midwest Mechanical Contractors, Inc., M W Builders, Inc., Midwest Mehanical Contractors of New Jersey, Inc., and Pahor Air Conditioning, Inc. - Page 3




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          through 2001, and MMC filed consolidated corporate Federal income           
          tax returns with these entities for 1997, 1998, and 1999.                   
          Petitioners are accrual basis taxpayers.                                    
          1997 Change in Accounting Method                                            
               Petitioners elected on the return for 1997 to change the               
          method of accounting for customer paper.  Petitioners had                   
          previously used the original cost basis method to account for               
          customer paper and elected to change to the mark-to-market method           
          on the return for 1997.  MMC reported a deduction of $5,349,372             
          related to this change in accounting method (the 1997 deduction).           
          Change in Law and 1998 Change in Accounting Method                          
               Congress amended the law governing the mark-to-market                  
          accounting method in the Internal Revenue Service Restructuring             
          and Reform Act of 1998 (the RRA), Pub. L. 105-206, sec. 7003(a),            
          112 Stat. 832.  The RRA added to the Code section 475(c)(4),                
          which provides that nonfinancial customer paper is ineligible for           
          mark-to-market treatment.  This new provision of the Code applies           
          to petitioners’ customer paper, and thus petitioners could not              
          use the mark-to-market method any longer.  One year after their             
          change to the mark-to-market method, they had to revert to their            
          original accounting method.                                                 
               After petitioners reverted to the original method, the                 
          effective date provisions of the RRA required petitioners to                
          offset the 1997 deduction, which they had taken when they                   







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