Court Opinion

ID: 4486046
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:34:08.954253+00
Date Added: 2024-06-11T15:03:47.602454
License: Public Domain

SWIFT, J., dissenting: The majority concludes that Export is to be taxed as a domestic corporation for its taxable year ending October 31, 1980. As a domestic corporation and as an accrual basis taxpayer,1 Export is governed by the principal of the accrual method of tax accounting under which receivables are included in taxable income in the year all events occur which fix Export’s right to that income. Sec. 1.446-l(c)(l)(ii), Income Tax Regs.; Spring City Foundry Co. v. Commissioner, 292 U.S. 182, 184 (1934); Chesapeake Financial Corp. v. Commissioner, 78 T.C. 869, 877 (1982). The above principle of the acrual method of accounting is not affected by when receivables are actually received, nor by whether a taxpayer establishes a bookkeeping account reflecting its entitlement to the receivables. As the Supreme Court stated— it is the right to receive and not the actual receipt that determines the inclusion of the amount in gross income. When the right to receive an amount becomes fixed, the right accrues. [Spring City Foundry v. Commisioner, supra at 184. Emphasis in original.] Based on the majority’s factual finding that (under the commission agreement between Export and RMAI) Export was entitled to $308,443 in commissions from RMAI at the end of its 1980 taxable year, Export should be required to accrue that amount in its 1980 taxable income. If RMAI is an accrual basis taxpayer (which is unclear from the majority’s opinion), then under the same tax accounting principle, RMAI should be entitled to accrue the $308,443 as a commission expense deduction on its 1980 tax return. See United States v. General Dynamics Corp., 481 U.S___(1987). Chabot, Gerber, Ruwe, and Whalen, JJ., agree with this dissent.   Although the majority does not expressly state that Export is an accrual basis taxpayer, such is implied by the majority’s opinion at page 1233 that $308,443 of commissions receivable was reportable on Export’s 1980 tax return.