Andrew Little, Jr., and Myrn Little v. Commissioner of Internal Revenue

This petition for review of a tax court decision presents a problem of concern to the livestock industry: the proper income tax treatment of the proceeds of sale of breeding stock raised by the taxpayers where the taxpayers are on the accrual system of accounting and following the “unit-livestock-price method” of livestock inventory valuation.

Taxpayers contend that they are entitled to change their breeding herd from an accrual to a cost system of accounting, which would place taxpayers in a more favorable position in reporting the proceeds of sale of breeding animals. Further, taxpayers contend, they should be permitted to make this change retroactively and recover the tax benefits of the change as though it had applied throughout the life of these animals.

The petition for review involves a deficiency in federal income tax for 1951 in the amount of $10,866.62. On petition of the taxpayers for redetermination the tax court upheld the commissioner. 34 T.C. 156 . The court ruled that the taxpayers were not entitled to change their breeding herd to a cost accounting system from an accrual system; further, in any event, that such change could not be made retroactively. We have…