Sandstone,Inc. ,has consistently included some factory overhead as a current expense,rather than as a cost of producing goods.As a result,the beginning inventory for 2014 is understated by $40,000.If Sandstone voluntarily changes accounting methods effective January 1,2014,the positive adjustment to the inventory is a § 481 adjustment and $10,000 must be added to taxable income for each year 2014,2015,2016,and 2017.

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The positive § 481 adjustment can be spread over the current and three succeeding tax years.