Source: https://caselaw.findlaw.com/us-supreme-court/320/516.html
Timestamp: 2019-04-22 07:07:34+00:00

Document:
DIXIE PINE P. CO. v. C.I.R.
[320 U.S. 516, 517] Mr. T. J. Wills, of Hattiesburg, Miss., for petitioner.
In 1936 the Mississippi taxing authorities declared that a solvent used by petitioner in its business was gasoline within the meaning of a state law defining gasoline and laying a tax upon its receipt and use. Accordingly a tax was assessed against the petitioner with respect to the receipt and use of the solvent in 1936. Petitioner paid the tax, and, in the same year, brought suit against the Motor Vehicle Commissioner of Mississippi alleging that the solvent was not within the comprehension of the state law and that the Commissioner should be temporarily and permanently enjoined from future collections of tax in respect of it. The Commissioner's demurrer to the complaint was sustained but, on appeal, the Supreme Court of Mississippi decided that, on the pleadings, the solvent was not within the definition of gasoline contained in the state statute. After this decision petitioner denied that it owed, and ceased and refused to pay, any gasoline tax on solvent used by it.
In December, 1937, on advice of counsel, petitioner (which kept its books and filed its federal income tax returns on the accrual basis) made book entries accruing gasoline tax assessed by the Motor Vehicle Commissioner in 1937. The actual accrual entries were made sometime between January 1 and March 15, 1938, as of December 31, [320 U.S. 516, 518] 1937, in the amount of approximately $21,000, and petitioner deducted this amount from income in making its 1937 federal income tax return, although the sum had not been, and never was, paid.
In December 1938 petitioner and the Attorney General of Mississippi filed an agreed statement of facts in the state court suit, and, in the same month, the trial judge entered a final decree perpetually enjoining the Motor Vehicle Commissioner from assessing gasoline tax on the solvent used by petitioner. This decree was subsequently affirmed by the Supreme Court of Mississippi. In its 1938 federal income tax return petitioner, by way of compensating entry, included the sum of $21,000 as income and as a recovery, in view of the Mississippi trial court's decree of December 1938.
Section 23(c) of the Revenue Act of 19364 permits the deduction from gross income of taxes 'paid or accrued within the taxable year.' Sections 41, 42, and 43 make provision for tax accounting on the accrual basis, where the taxpayer keeps his books on that principle, provided his method clearly reflects his income in any taxable year.
To this effect are the decisions of the Board of Tax Appeals in numerous cases, and the instant decision was in line with earlier rulings as to proper tax accounting practice. Since the Board appled the correct rule of law, its determination that the item in question was not properly deducted on the accrual basis is entitled to the finality indicated by Dobson v. Helvering, 320 U.S. 489 , 64 S.Ct. 239. The court below properly refused to disturb the Board's determination.
[ Footnote 1 ] 45 B.T.A. 286.
[ Footnote 2 ] 134 F.2d 273.
[ Footnote 3 ] Commissioner v. Central United Nat. Bank, 6 Cir., 99 F.2d 568; J. A. Dougherty's Sons v. Commissioner, 3 Cir., 121 F.2d 700; Davies' Estate v. Commissioner, 6 Cir., 126 F.2d 294.
[ Footnote 4 ] 49 Stat. 1648, 1659, 26 U.S.C.A.Int.Rev.Acts, page 827.
[ Footnote 5 ] See Lucas v. American Code Co., 280 U.S. 445 , at pages 450, 452, 50 S.Ct. 202, 203, 204, 67 A.L.R. 1010, Notes 1 and 3.
[ Footnote 6 ] United States v. Anderson, 269 U.S. 422 , 46 S.Ct. 131; American Nat. Co. v. United States, 274 U.S. 99 , 47 S.Ct. 520; Niles-Bement-Pond Co. v. United States, 281 U.S. 357 , 50 S.Ct. 251; Aluminum Castings Co. v. Routzahn, 282 U.S. 92 , 51 S.Ct. 11; cf. Continental Tie & Lumber Co. v. United States, 286 U.S. 290 , 52 S.Ct. 529.
[ Footnote 7 ] United States v. Anderson, supra, 269 U.S. at page 441, 46 S.Ct. at page 134.
[ Footnote 8 ] Lucas v. American Code Co., supra, 280 U.S. at pages 450, 451, 50 S. Ct. at pages 203, 204, 67 A.L.R. 1010.
[ Footnote 9 ] Cf. Brown v. Helvering, 291 U.S. 193 , 54 S.Ct. 356.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.