26 U.S.C. § 446

Current through P.L. 118-106 (published on www.congress.gov on 10/04/2024)

Section 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.

26 U.S.C. § 446

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

EDITORIAL NOTES

AMENDMENTS1984-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".

STATUTORY NOTES AND RELATED SUBSIDIARIES

EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98-369, div. A, title I, §161(b), July 18, 1984, 98 Stat. 697, 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]."

Secretary

The term "Secretary" means the Secretary of the Treasury or his delegate.

taxpayer

The term "taxpayer" means any person subject to any internal revenue tax.

trade or business

The term "trade or business" includes the performance of the functions of a public office.