Living in California was not his choice but was dictated by the exigencies of his work for the client. He spent more time in Illinois than California during each of the years in question. The taxpayer's connection to California was to provide services on an as-needed basis. He sought consulting work from other, unrelated clients from his Illinois office. When they are too far out of line, however, the IRS can require a taxpayer to switch to the accrual method of accounting.
Most companies incur professional services expenses on a regular basis.
As a result, many choose to hire attorneys, accountants and others on retainer. Recently, one taxpayer litigated both of these issues. Dana Corp. and all but one of its subsidiaries used the accrual method of accounting. Leverage Leasing used the cash method. It received its rents in arrears and paid its interest expense in the same manner.