Internal Revenue Code:Sec. 446. General rule for methods of accounting

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Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter E - Accounting Periods and Methods of Accounting
         PART II - METHODS OF ACCOUNTING
          Subpart A - Methods of Accounting in General
        

Statute

    Sec. 446. General rule for methods of accounting
 
    (a) General rule
      Taxable income shall be computed under the method of accounting
    on the basis of which the taxpayer regularly computes his income in
    keeping his books.
    (b) Exceptions
      If no method of accounting has been regularly used by the
    taxpayer, or if the method used does not clearly reflect income,
    the computation of taxable income shall be made under such method
    as, in the opinion of the Secretary, does clearly reflect income.
    (c) Permissible methods
      Subject to the provisions of subsections (a) and (b), a taxpayer
    may compute taxable income under any of the following methods of
    accounting -
        (1) the cash receipts and disbursements method;
        (2) an accrual method;
        (3) any other method permitted by this chapter; or
        (4) any combination of the foregoing methods permitted under
      regulations prescribed by the Secretary.
    (d) Taxpayer engaged in more than one business
      A taxpayer engaged in more than one trade or business may, in
    computing taxable income, use a different method of accounting for
    each trade or business.
    (e) Requirement respecting change of accounting method
      Except as otherwise expressly provided in this chapter, a
    taxpayer who changes the method of accounting on the basis of which
    he regularly computes his income in keeping his books shall, before
    computing his taxable income under the new method, secure the
    consent of the Secretary.
    (f) Failure to request change of method of accounting
      If the taxpayer does not file with the Secretary a request to
    change the method of accounting, the absence of the consent of the
    Secretary to a change in the method of accounting shall not be
    taken into account -
        (1) to prevent the imposition of any penalty, or the addition
      of any amount to tax, under this title, or
        (2) to diminish the amount of such penalty or addition to tax.
 

Sources

    (Aug. 16, 1954, ch. 736, 68A Stat. 151; Pub. L. 94-455, title XIX,
    Sec. 1906 (b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98-369,
    div.  A, title I, Sec. 161(a), July 18, 1984, 98 Stat. 696.)
 

Miscellaneous

                                 AMENDMENTS
      1984 - Subsec. (f). Pub. L. 98-369 added subsec. (f).
      1976 - Subsecs. (b), (c), (e). Pub. L. 94-455 struck out ''or his
    delegate'' after ''Secretary''.
                      EFFECTIVE DATE OF 1984 AMENDMENT
      Section 161(b) of Pub. L. 98-369 provided that: ''The amendment
    made by this section (amending this section) shall apply to taxable
    years beginning after the date of the enactment of this Act (July
    18, 1984).''
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 404A, 6110 of this title.