Source: https://supreme.justia.com/cases/federal/us/304/191/
Timestamp: 2019-04-26 16:00:41+00:00

Document:
A taxpayer who, in his income tax return for 1928, reported income from sale of property according to the deferred payment method, although he might have used the installment method, is not entitled, upon a claim for refund, after the time for filing the return has expired, to have the income computed according to the installment method, at least where it is not shown that the deferred payment method, rightly applied, does not clearly reflect his income. P. 304 U. S. 192.
Certiorari, 302 U.S. 679, to review the affirmance of a judgment rejecting a claim for refund of income taxes.
March 14, 1929, petitioner filed its income tax return for 1928. The return reported $137,007.17 as profit resulting from sales of lots in that year. That figure was arrived at by adding to the cash paid in 1928 on account of the sales, the amounts later to be paid, and by deducting from the total the cost of lots and improvements and expenses of the sales.
In 1931, petitioner filed a claim for refund of the entire tax on the ground that the sales had been made on the installment basis, but the profits had been reported as if the sales were for cash, and that this was erroneous. The claim was rejected. Petitioner sued; trial by jury having been waived, the District Court made findings of fact and held that petitioner reported income as authorized by the Revenue Act of 1928 and applicable regulations, and thereby made an election which became binding on the expiration of the time allowed for filing the return. Accordingly, it gave judgment for respondent. Upon the same ground, the Circuit Court of Appeals affirmed. 91 F.2d 590. The decision below being in conflict with that of the Court of Claims in Kaplan v. United States, 18 F.Supp. 965, we granted a writ of certiorari.
in any taxable year that proportion of the installment payments actually received in that year which the gross profit realized or to be realized when payment is completed bears to total contract price. See § 44(a).
Regulations 74 permit the vendor to return income from installment sales on the straight accrual or cash receipts basis; when so reported, the sales are treated as deferred payment sales not on the installment plan. Article 353. In ascertaining the amount of profit or loss from that class of sales, the obligations of the purchaser to the vendor are taken at their fair market value; if they have none, the payments in cash or other property having a fair market value shall be applied against and reduce the basis of the property sold, and, if in excess of such basis, shall be taxable to the extent of the excess. Gain or loss is realized when the obligations are disposed of or satisfied, the amount being the difference between the reduced basis and the amount realized therefor. Article 354.
The question is whether, having filed a return according to the deferred payment method, the taxpayer, by filing claim for refund, is entitled to have the profit from the sales computed on the installment method.
Petitioner contends that the installment method alone discloses its income from the sales of lots, and that the deferred payment method failed clearly to reflect income.
of the deferred payment method would clearly reflect income, for that method permits installments to be taken at market value, and, if they have no market value, allows postponement of ascertainment of gain or loss until realized. While petitioner's return may have been an inept application of the deferred payment method, there is nothing in it or the statement of claim for refund that gives any support to the idea that, if rightly applied, that method would not clearly reflect income.
* Commissioner v. Moore, 48 F.2d 526, 528, cert. denied, 284 U.S. 620; Marks v. United States, 18 F.Supp. 911, 913; Sylvia S. Strauss v. Comm'n, 33 B.T.A. 855, aff'd, 87 F.2d 1018; Max Viault v. Comm'n, 36 B.T.A. 430, 431; Sarah Briarly v. Comm'n, 29 B.T.A. 256, 258; Louis Werner Saw Mill Co. v. Comm'n, 26 B.T.A. 141, 144, 145; Liberty Realty Corp. v. Comm'n, 26 B.T.A. 1119; Morgan Rundel v. Comm'n, 21 B.T.A. 1019; Johnson Realty Trust v. Comm'n, 21 B.T.A. 1333. Cf. United States v. Pettigrew, 81 F.2d 666; Rose v. Grant, 39 F.2d 340; Alameda Inv. Co. v. McLaughlin, 33 F.2d 120; Buttolph v. Commissioner, 29 F.2d 695; Safety Electric Products Co. v. Helvering, 70 F.2d 439; Dr. Pepper Bottling Co. v. Commissioner, 69 F.2d 768; Radiant Class Co. v. Burnet, 60 App.D.C. 351, 54 F.2d 718.

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