Court Opinion

ID: 8138651
Source: CourtListenerOpinion
Date Created: 2022-09-09 18:30:49.062074+00
Date Added: 2024-06-11T16:39:28.174652
License: Public Domain

OPINION. HaRlan, Judge: Since the hearing of this case and since the filing of petitioner’s brief a case, undistinguishable on its relevant facts from the case at bar, has been decided by this Court. On July 11, 1946, this Court decided, in Kimbrell's Home Furnishings, Inc., 7 T. C. 339, that a corporation engaged in the sale of furniture at retail on the installment basis could not, in the computation of its equity invested capital, include unrealized profits as represented by unpaid installment notes received from the purchasers at the time of the sale. All of the questions raised by both the petitioner and the respondent herein are fully discussed in the decision in the Kimbrell's Home Furnishings, Inc., case. Petitioner, in his reply brief, seeks to distinguish the Kimbrell case from the one at bar, due to the fact that in the former case the taxpayer computed its net income on the installment basis as provided by section 44 (a) and its excess profits net income on the accrual basis, whereas in the case at bar the taxpayer filed its income and excess profits tax returns on the accrual basis, but “elected to compute and report the profit” from its installment sales under section 44 (a). The claimed distinction impresses us as being without substance. In both cases the taxpayers included anticipated and unreported profits from installment sales in equity invested capital as “accumulated earnings and profits.”1 Approval of this treatment of anticipated and unreported profits from installment sales would be equivalent to an admission that a different rule applies in the computation of accumulated earnings and profits for excess profits purposes than in the computation of earnings and profits for income tax purposes. In Federal Union Insurance Co., 5 T. C. 374, we held to the contrary. Judgment will be entered for the respondent.   SEC. 718 [I. R. C.]. EQUITY INVESTED CAPITAL. (a) Definition. — The equity invested capital for any day of any taxable year shall be determined as of the beginning of such day and shall be the sum of the following amounts, reduced as provided in subsection (b)— • ••••*• (4) Earnings and profits at beginning of tear. — The accumulated earnings and profits as of the beginning of such taxable year; * * •