Page 355

TITLE 26-INTERNAL REVENUE CODE enue Code of 1954 wher the notice and demand takes place after Feb. 28, 1977, see section 1204(d) of Pub. L. 94-455, as amended by Pub. L. 94-528, set out as an Ef- fective Date of 1976 Amendment note under section 6851 of this title. Amendment of subsec. (d) by section 301(e) of Pub. L. 94-455 effective for items of tax preferences for tax- able years beginning after Dec. 31, 1975, with excep- tions, see section 301(g) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 56 of this title. For effective date of amendment of subsec. (e) by section 1607(b)(1)(C) of Pub. L. 94-455, see section 1608(c) of Pub. L..94-455, set out as an Effective Date of 1976 Amendment note under section 857 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Subsec. (d) of this section applicable to taxable years ending after Dec. 31, 1969, see section 301(c) of Pub. L. 91-172, set out as an Effective Date note under section 56 of this title. EFFECTIVE DATE OF 1960 AMENDMENT Amendment by Pub. L. 86-779 applicable with re- spect to taxable years of real estate investment trusts beginning after Dec. 31, 1960, see section 10(k) of Pub. L. 86-779, set out as on Effective Date note under sec- tion 856 of this title. CROSS REFERENCES Joint return not allowed if taxable year of either spouse is fractional part of year, see section 6013 of this title. SECTION R"ERRED TO IN OTHER SECTIONS This section is referred to in sections 142, 441, 536, 546, 557, 818, 852, 857, 6013 of this title. PART II-METHODS OF ACCOUNTING Subpart A. Methods of accounting in general. B. Taxable year for which items of gross income in- cluded. C. Taxable year for which deductions taken. D. Inventories. SUBPART A-METHODS OF AccOUNTIN, IN GENERAL Sec. 446. General rule for methods ol accounting. 447. Method of accounting for corporations engaged in farming AMENDMENTS 1976-Pub. L. 94-455, title II, § 207(c)(1)(B), Oct. 4. 1976, 90 Stat. 1541, added item 447. § 446. General rule for methods of accounting (a) General rule Taxable in-ome 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 regular- ly used by the taxpay,,-, or if the method used does not clearly reflect income, the computa- tion of taxable income shall be made under such method as, in the opinion of the Secre- tary, 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 meth- ods 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 con- sent of the Secretary. (Aug. 16, 1954, ch. 736, 68A Stat. 151; Oct. 4. 1976, Pub. L. 94-455, title XIX, § 1906 (b)(13)(A), 90 Stat. 1834.) AMENDMENTS 1976-Subsecs. (b), (c), (W). Pub. L. 94-455 struck out "or his delegate" following "Secretary". CRoss REFERENCES Period for computation of taxable income, see sec- tion 441 of this title. SECTION REFERAED TO IN OTHER SECTIONS This section is referred to in sections 463, 6110 of this title. § 447. Method of accounting for corporations engaged in farming (a) General rule Except as otherwise provided by law, the tax- able income from farming of- (1) a corporation engaged in the trade or business of farming, or" (2) a partnership engaged in the trade or business of farming, if a corporation is a part- ner in such partnership, shall be computed on an accrual method of ac- counting and with the capitalization of prepro- ductive expenses described in subsection (b). This section shall not apply to the trade or business of operating a nursery or to the raising or harvesting of trees (other than fruit and nut trees). (b) Preproductive period expenses (1) In general For purposes of this section, the term "pre- productive period expenses" means any amount which is attributable to crops, ani- mals, or any other property having a crop or yield during the preproductive period of such property. (2) Exceptions Paragraph (1) shall not appiy- (A) to taxes and interest, and Page 355 § 447