Smith v. Commissioner
(1983)
SCHLUDE ET UX. v. COMMISSIONER OF
INTERNAL REVENUE
No. 80
SUPREME COURT OF THE UNITED STATES
372 U.S. 128; 83 S. Ct. 601; 9 L.
Ed.2d 633;>
63-1 U.S. Tax Cas. (CCH) P9284; 11
A.F.T.R.2d (P-H) 751; 1963-1 C.B. 99
December 10, 1962, Argued
February 18, 1963, Decided
<
PRIOR HISTORY:
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE EIGHTH CIRCUIT.
DISPOSITION: 296 F.2d 721, affirmed in part, reversed
in part and remanded.
SYLLABUS: Petitioners, who operated dance studios,
kept their books and made their income tax returns on a fiscal-year
accrual basis. They obtained from students contracts for dancing lessons
over periods of years, to be paid for partly in cash and partly in
installments, sometimes represented by negotiable notes which were
discounted at banks. For the years 1952, 1953 and 1954, they reported as
gross income only that portion of the advance payments received in cash
and the amounts of notes and contracts executed during the respective
years which corresponded with the number of hours taught. The balance was
reserved for accrual in future years when additional lessons were taught,
waived or forfeited. Held: It was proper for the Commissioner, in the
exercise of his discretion under @ 41 of the Internal Revenue Code of 1939
and @ 446 (b) of the Internal Revenue Code of 1954, to reject petitioners'
accounting system as not clearly reflecting income and to include as
income in a particular year advance payments by way of cash, negotiable
notes and contract installments falling due but remaining unpaid during
that year. American Automobile Association v. United States, 367 U.S. 687.
Pp. 129-137.
COUNSEL: Carl F. Bauersfeld argued the cause for
petitioners. With him on the briefs was Robert Ash.
Assistant Attorney General Oberdorfer argued the cause
for respondent. With him on the brief were Solicitor General Cox and Harry
Baum.
Dean Acheson, Fontaine C. Bradley, John T. Sapienza,
Robert L. Randall and Alvin Friedman filed briefs for the American
Institute of Certified Public Accountants, as amicus curiae, urging
reversal.
JUDGES: Warren, Black, Douglas, Clark, Harlan,
Brennan, Stewart, White, Goldberg
OPINIONBY: WHITE
OPINION: MR. JUSTICE WHITE delivered the opinion of
the Court.
This is still another chapter in the protracted
problem of the time certain items are to be recognized as income for the
purposes of the federal income tax. The Commissioner of Internal Revenue
increased the 1952, 1953 and 1954 ordinary income of the taxpayers n1 by
including in gross income for those years amounts received or receivable
under contracts executed during those years despite the fact that the
contracts obligated taxpayers to render performance in subsequent periods.
These increases produced tax deficiencies which the taxpayers
unsuccessfully challenged in the Tax Court on the ground that the amounts
could be deferred under their accounting method. On appeal, the Court of
Appeals for the Eighth Circuit agreed with the taxpayers and reversed the
Tax Court, 283 F.2d 234, the decision having been rendered prior to ours
in American Automobile Assn. v. United States, 367 U.S. 687. Following the
American Automobile Association case, certiorari in this case was granted,
the judgment of the lower court vacated, 367 U.S. 911, and the cause
remanded for further consideration in light of American Automobile
Association. 368 U.S. 873. In a per curiam opinion, the Court of Appeals
held that in view of American Automobile Association, the taxpayers'
accounting method "does not, for income tax purposes, clearly reflect
income" and affirmed the judgment for the Commissioner, 296 F.2d 721.
We brought the case back once again to consider whether the lower court
misapprehended the scope of American Automobile Association. 370 U.S. 902.
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n1 The controversy turns upon the accounting method
employed by a partnership in which the taxpayers were equal partners.
Since a partnership is not a taxable entity, the partners being liable in
their individual capacities for their distributive share of partnership
income, @ 181, Int. Rev. Code of 1939; @ 701, Int. Rev. Code of 1954, the
proper statement of the partnership's income affects only the tax
liabilities of the partners individually. However, as there is no other
dispute in the case, for convenience the discussion will center upon the
partnership's accounting method without further mention of its effect upon
the respective tax liabilities of the partners.
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Taxpayers, husband and wife, formed a partnership to
operate ballroom dancing studios (collectively referred to as
"studio") pursuant to Arthur Murray, Inc., franchise agreements.
Dancing lessons were offered under either of two basic contracts. The cash
plan contract required the student to pay the entire down payment in cash
at the time the contract was executed with the balance due in installments
thereafter. The deferred payment contract required only a portion of the
down payment to be paid in cash. The remainder of the down payment was due
in stated installments and the balance of the contract price was to be
paid as designated in a negotiable note signed at the time the contract
was executed.
Both types of contracts provided that (1) the student
should pay tuition for lessons in a certain amount, (2) the student should
not be relieved of his obligation to pay the tuition, (3) no refunds would
be made, and (4) the contract was noncancelable. n2 The contracts
prescribed a specific number of lesson hours ranging from five to 1,200
hours and some contracts provided lifetime courses entitling the student
additionally to two hours of lessons per month plus two parties a year for
life. Although the contracts designated the period during which the
lessons had to be taken, there was no schedule of [**603] specific dates,
which were arranged from time to time as lessons were given.
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n2 Although the contracts stated they were
noncancelable, the studio frequently rewrote contracts reducing the number
of lessons for a smaller sum of money. Also, despite the fact that the
contracts provided that no refunds would be made, and despite the fact
that the studio discouraged refunds, occasionally a refund would be made
on a canceled contract.
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Cash payments received directly from students and
amounts received when the negotiable notes were discounted at the bank or
fully paid n3 were deposited in the studio's general bank account without
segregation from its other funds. The franchise agreements required the
studio to pay to Arthur Murray, Inc., on a weekly basis, 10% of these cash
receipts as royalty and 5% of the receipts in escrow, the latter to
continue until a $ 20,000 indemnity fund was accumulated. Similarly, sales
commissions for lessons sold were paid at the time the sales receipts were
deposited in the studio's general bank account.
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n3 Notes taken from the students were ordinarily
transferred, with full recourse, to a local bank which would deduct the
interest charges and credit the studio with approximately 50% of the face
amount. The remaining 50% was held in a reserve account, unavailable to
the studio, until the note was fully paid, at which time the reserved
amount was transferred to the studio's general bank account.
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The studio, since its inception in 1946, has kept its
books and reported income for tax purposes n4 on an accrual system of
accounting. In addition to the books, individual student record cards were
maintained showing the number of hours taught and the number still
remaining under the contract. The system, in substance, operated as
follows. When a contract was entered into, a "deferred income"
account was credited for the total contract price. At the close of each
fiscal period, the student record cards were analyzed and the total number
of taught hours was multiplied by the designated rate per hour of each
contract. The resulting sum was deducted from the deferred income account
and reported as earned income on the financial statements and the income
tax return. In addition, if there had been no activity in a contract for
over a year, or if a course were reduced in amount, an entry would be made
canceling the untaught portion of the contract, removing that amount from
the deferred income account, and recognizing gain to the extent that the
deferred income exceeded the balance due on the contract, i. e., the
amounts received in advance. The amounts representing lessons taught and
the gains from cancellations constituted the chief sources of the
partnership's gross income. n5 The balance of the deferred income account
would be carried forward into the next fiscal year to be increased or
decreased in accordance with the number of new contracts, lessons taught
and cancellations recognized.
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n4 Though the studio is not a taxable entity, it is
still required to prepare and file an information return showing, inter
alia, items of gross income and allowable deductions. @ 187, 1939 Code; @
6031, 1954 Code.
n5 The following schedule reflects ordinary net income
on the studio's books and returns:
Gross income:
1952 1953 1954
Contract amounts trans-
$ $ $
ferred to earned income...
143,949.63 243,277.46 325,266.97
Gains from cancellation...
26,861.40 19,483.36 28,448.61
Other
income...
4,041.21 11,426.23 16,987.31
Total...
174,852.24 274,187.05 370,702.89
Deductions...
137,267.91 223,390.69 301,609.76
Ordinary net
income...
37,584.33 50,796.36 69,093.13
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Deductions were also reported on the accrual basis
except that the royalty payments and the sales commissions were deducted
when paid irrespective of the period in which the related receipts were
taken into income. Three certified public accountants testified that in
their opinion the accounting system employed truly reflected net income in
accordance with commercial accrual accounting standards.
The Commissioner included in gross income for the
years in question not only advance payments received in cash but the full
face amounts of notes and contracts executed during the respective years.
The Tax Court and the Court of Appeals upheld the Commissioner, but the
United States in this Court has retreated somewhat and does not now claim
the includibility in gross income of future payments which were not
evidenced by a note and which were neither due by the terms of the
contract nor matured by performance of the related services. n6 The
question remaining for decision, then, is this: Was it proper for the
Commissioner, exercising his discretion under @ 41, n7 1939 Code, and @
446 (b), n8 1954 Code, to reject the studio's accounting system as not
clearly reflecting income and to include as income in a particular year
advance payments by way of cash, negotiable notes and contract
installments falling due but remaining unpaid during that year? We hold
that it was since we believe the problem is squarely controlled by
American Automobile Association, 367 U.S. 687.
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n6 "Upon reconsideration, however, we concede the
error of accruing future payments which are neither due as a matter of
contract, nor matured by performance of the related services. Indeed, the
Studio's right to collect the installment on its due date depends on its
continuing ability and willingness to perform. Until that time, its right
to receive payment has not fully ripened." Brief for the United
States, p. 67.
n7 "SEC. 41. GENERAL RULE.
"The net income shall be computed upon the basis
of the taxpayer's annual accounting period (fiscal year or calendar year,
as the case may be) in accordance with the method of accounting regularly
employed in keeping the books of such taxpayer; but if no such method of
accounting has been so employed, or if the method employed does not
clearly reflect the income, the computation shall be made in accordance
with such method as in the opinion of the Commissioner does clearly
reflect the income. If the taxpayer's annual accounting period is other
than a fiscal year as defined in section 48 or if the taxpayer has no
annual accounting period or does not keep books, the net income shall be
computed on the basis of the calendar year."
n8 "SEC. 446. GENERAL RULE FOR METHODS OF
ACCOUNTING.
"(a) GENERAL RULE. -- Taxable income shall be
computed under the method of accounting on the basis of which the taxpayer
regularly computes his income in keeping his books.
"(b) EXCEPTIONS. -- If no method of accounting
has been regularly used by the taxpayer, or if the method used does not
clearly reflect income, the computation of taxable income shall be made
under such method as, in the opinion of the Secretary or his delegate,
does clearly reflect income.
"(c) PERMISSIBLE METHODS. -- Subject to the
provisions of subsections (a) and (b), a taxpayer may compute taxable
income under any of the following methods of accounting --
"(1) the cash receipts and disbursements method;
"(2) an accrual method;
"(3) any other method permitted by this chapter;
or
"(4) any combination of the foregoing methods
permitted under regulations prescribed by the Secretary or his
delegate."
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The Court there had occasion to consider the entire
legislative background of the treatment of prepaid income. The retroactive
repeal of @ 452 of the 1954 Code, "the only law incontestably
permitting the practice upon which [the taxpayer] depends," was
regarded as reinstating long-standing administrative and lower court
rulings that accounting systems deferring prepaid income could be rejected
by the Commissioner.
"The fact is that @ 452 for the first time
specifically declared petitioner's system of accounting to be acceptable
for income tax purposes, and overruled the long-standing position of the
Commissioner and courts to the contrary. And the repeal of the section the
following year, upon insistence by the Treasury that the proposed
endorsement of such tax accounting would have a disastrous impact on the
Government's revenue, was just as clearly a mandate from the Congress that
petitioner's system was not acceptable for tax purposes." 367 U.S.,
at 695.
Confirming that view was the step-by-step approach of
Congress in granting the deferral privilege to only limited groups of
taxpayers while exploring more deeply the ramifications of the entire
problem.
Plainly, the considerations expressed in American
Automobile Association are apposite here. We need only add here that since
the American Automobile Association decision, a specific provision
extending the deferral practice to certain membership corporations was
enacted, @ 456, 1954 Code, added by @ 1, Act of July 26, 1961, 75 Stat.
222, continuing, at least so far, the congressional policy of treating
this problem by precise provisions of narrow applicability. Consequently,
as in the American Automobile Association case, we invoke the
"long-established policy of the Court in deferring, where possible,
to congressional procedures in the tax field," and, as in that case,
we cannot say that the Commissioner's rejection of the studio's deferral
system was unsound.
The American Automobile Association case rested upon
an additional ground which is also controlling here. Relying upon
Automobile Club of Michigan v. Commissioner, 353 U.S. 180, the Court
rejected the taxpayer's system as artificial since the advance payments
related to services which were to be performed only upon customers'
demands without relation to fixed dates in the future. The system employed
here suffers from that very same vice, for the studio sought to defer its
cash receipts on the basis of contracts which did not provide for lessons
on fixed dates after the taxable year, but left such dates to be arranged
from time to time by the instructor and his student. Under the contracts,
the student could arrange for some or all of the additional lessons or
could simply allow their rights under the contracts to lapse. But even
though the student did not demand the remaining lessons, the contracts
permitted the studio to insist upon payment in accordance with the
obligations undertaken and to retain whatever prepayments were made
without restriction as to use and without obligation of refund. At the end
of each period, while the number of lessons taught had been meticulously
reflected, the studio was uncertain whether none, some or all of the
remaining lessons would be rendered. Clearly, services were rendered
solely on demand in the fashion of the American Automobile Association and
Automobile Club of Michigan cases. n9
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n9 The treatment of "gains from
cancellations" underlines this aspect of the case. These gains,
representing amounts paid or promised in advance of lessons given, were
recognized in those periods in which the taxpayers arbitrarily decided the
contracts were to be deemed canceled. The studio made no attempt to report
estimated cancellations in the year of receipt, choosing instead to defer
these gains to periods bearing no economic relationship to the income
recognized. Cf. Continental Tie & Lumber Co. v. United States, 286
U.S. 290.
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Moreover, percentage royalties and sales commissions
for lessons sold, which were paid as cash was received from students or
from its note transactions with the bank, were deducted in the year paid
even though the related items of income had been deferred, at least in
part, to later periods. In view of all these circumstances, we hold the
studio's accrual system vulnerable under @ 41 and @ 446 (b) with respect
to its deferral of prepaid income. Consequently, the Commissioner was
fully justified in including payments in cash or by negotiable note n10 in
gross income for the year in which such payments were received. If these
payments are includible in the year of receipt because their allocation to
a later year does not clearly reflect income, the contract installments
are likewise includible in gross income, as the United States now [*137]
claims, in the year they become due and payable. For an accrual basis
taxpayer "it is the right to receive and not the actual receipt that
determines the inclusion of the amount in gross income," Spring City
Co. v. Commissioner, 292 U.S. 182, 184; Commissioner v. Hansen, 360 U.S.
446, and here the right to receive these installments had become fixed at
least at the time they were due and payable.
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n10 Negotiable notes are regarded as the equivalent of
cash receipts, to the extent of their fair market value, for the purposes
of recognition of income. @ 39.22 (a)-4, Treas. Reg. 118, 1939 Code; @
1.61-2 (d)(4), Treas. Reg., 1954 Code; Mertens, Federal Income Taxation
(1961), @ 11.07. See Pinellas Ice Co. v. Commissioner, 287 U.S. 462.
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We affirm the Court of Appeals insofar as that court
held includible the amounts representing cash receipts, notes received and
contract installments due and payable. Because of the Commissioner's
concession, we reverse that part of the judgment which included amounts
for which services had not yet been performed and which were not due and
payable during the respective periods and we remand the case with
directions to return the case to the Tax Court for a redetermination of
the proper income tax deficiencies now due in light of this opinion.
It is so ordered.
DISSENTBY: STEWART
DISSENT: MR. JUSTICE STEWART, with whom MR. JUSTICE
DOUGLAS, MR. JUSTICE HARLAN, and MR. JUSTICE GOLDBERG join, dissenting.
As the Court notes, this case is but the most recent
episode in a protracted dispute concerning the proper income tax treatment
of amounts received as advances for services to be performed in a
subsequent year by a taxpayer who is on an accrual rather than a cash
basis. The Government has consistently argued that such amounts are
taxable in the year of receipt, relying upon two alternative arguments: It
has claimed that deferral of such payments would violate the "annual
accounting" principle which requires that income not be postponed
from one year to the next to reflect the long-term economic result of a
transaction. Alternatively, the Government has argued that advance
payments must be reported as income in the year of receipt under the
"claim-of-right doctrine," which requires
otherwise reportable income, held under a claim of right without
restriction as to use, to be reported when received despite the fact that
the taxpayer's claim to the funds may be disputed. n1
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n1 The Commissioner has sometimes been successful in
urging the
"claim-of-right doctrine" as a bar to the
deferral of advances by accrual-basis taxpayers. See, e. g., Andrews v.
Commissioner, 23 T. C. 1026, 1032-1033; South Dade Farms v. Commissioner,
138 F.2d 818 (C. A. 5th Cir.); Clay Sewer Pipe Assn. v. Commissioner, 139
F.2d 130 (C. A. 3d Cir.); Automobile Club of Michigan v. Commissioner, 230
F.2d 585, 591 (C. A. 6th Cir.), aff'd on other grounds, 353 U.S. 180.
In more recent cases, on the other hand, the Courts of
Appeals have held the claim-of-right doctrine irrelevant to this problem.
Bressner Radio, Inc., v. Commissioner, 267 F.2d 520, 524, 525-528 (C. A.
2d Cir.); Schuessler v. Commissioner, 230 F.2d 722, 725 (C. A. 5th Cir.);
Beacon Publishing Co. v. Commissioner, 218 F.2d 697, 699-701 (C. A. 10th
Cir.).
In the present case the Commissioner urged that the
"claim-of-right doctrine" was applicable even to advance fees
which were due under the contract but not yet paid, a position from which
he receded only when the case reached this Court. The Tax Court, at least
in one case, has accepted the argument. Your Health Club, Inc., v.
Commissioner, 4 T. C. 385.
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As I have elsewhere pointed out, neither of these
doctrines has any relevance to the question whether any reportable income
at all has been derived when payments are received in advance of
performance by an accrual-basis taxpayer. n2 The most elementary
principles of accrual accounting require that advances be considered
reportable income only in the year they are earned by the taxpayer's
rendition of the services for which the payments were made. The
Government's theories would [*139] force upon an accrual-basis taxpayer a
cash basis for advance payments in disregard of the federal statute which
explicitly authorizes income tax returns to be based upon sound accrual
accounting methods. n3
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n2 See American Automobile Assn. v. United States, 367
U.S. 687, at 699-702 (dissenting opinion).
n3
"SEC. 446. GENERAL RULE FOR METHODS OF
ACCOUNTING.
"(a) GENERAL RULE. -- Taxable income shall be
computed under the method of accounting on the basis of which the taxpayer
regularly computes his income in keeping his books.
"(b) EXCEPTIONS. -- If no method of accounting
has been regularly used by the taxpayer, or if the method used does not
clearly reflect income, the computation of taxable income shall be made
under such method as, in the opinion of the Secretary or his delegate,
does clearly reflect income.
"(c) PERMISSIBLE METHODS. -- Subject to the
provisions of subsections (a) and (b), a taxpayer may compute taxable
income under any of the following methods of accounting --
. . . .
"(2) an accrual method; . . . ."
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Apparently the Court agrees that neither the annual
accounting requirement nor the claim-of-right doctrine has any relevance
or applicability to the question involved in this case. For the Court does
not base its decision on either theory, but rather, as in two previous
cases, n4 upon the ground that the system of accrual accounting used by
these particular taxpayers does not "clearly reflect income" in
accord with the statutory command. n5 This result is said to be compelled
both by a consideration of legislative history and by an analysis of the
particular accounting system which these taxpayers employed.
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n4 Automobile Club of Michigan v. Commissioner, 353
U.S. 180, and American Automobile Assn. v. United States, 367 U.S. 687.
n5 See note 3, supra. See also @ 41, 1939 Code.
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For the reasons I have elsewhere stated at some
length, n6 to rely on the repeal of @@ 452 and 462 as indicating
congressional disapproval of accrual accounting principles is
conspicuously to disregard clear evidence of legislative intent. The
Secretary of the Treasury, who proposed the repeal of these sections, made
explicitly clear that no inference of disapproval of accrual accounting
principles was to be drawn from the repeal of the sections. n7 So did the
Senate Report. n8 The repeal of these sections was occasioned solely by
the fear of temporary revenue losses which would result from the taking of
"double deductions" during the year of transition by taxpayers
who had not previously maintained their books on an accrual basis. n9
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n6 See American Automobile Assn. v. United States, 367
U.S., at 703-711 (dissenting opinion).
n7 H. R. Rep. No. 293, 84th Cong., 1st Sess. 5.
n8 S. Rep. No. 372, 84th Cong., 1st Sess. 5-6. See
also H. R. Rep. No. 293, 84th Cong., 1st Sess. 4-5.
n9 Since the taxpayers in the present case have
consistently maintained their books on an accrual basis, they could not
have taken advantage of a "double deduction" even under the
repealed sections.
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The Court's decision can be justified, then, only upon
the basis that the system of accrual accounting used by the taxpayers in
this case did not "clearly reflect income" in accordance with
the command of @ 41. In the Automobile Club of Michigan case n10 the
taxpayer allocated yearly dues ratably over 12 months, so that only a
portion of the dues received during any fiscal year was reported as income
for that year. In the absence of any proof that services demanded by the
Automobile Club members were distributed in the same proportion over the
year, the Court held that the system used by the taxpayer did not clearly
reflect income. In the American Automobile Association case n11 the
taxpayer offered statistical proof to show that its proration of dues
reasonably matched the proportion of its yearly costs incurred each month
in rendering services attributable to those dues. The Court discounted the
validity of this statistical evidence because the amount and timing of the
services demanded were wholly within the control of the individual members
of the Association, and the Court thought that the Association could not,
therefore, estimate with accuracy the costs attributable to each
individual member's demands.
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n10 353 U.S. 180.
n11 367 U.S. 687.
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In the present case the difficulties which the Court
perceived in Automobile Club of Michigan and American Automobile
Association have been entirely eliminated in the accounting system which
these taxpayers have consistently employed. The records kept on individual
students accurately measured the amount of services rendered -- and
therefore the costs incurred by the taxpayer -- under each individual
contract during each taxable year. But, we are told, there is a fatal flaw
in the taxpayers' accounts in this case too: The individual contracts did
not provide "for lessons on fixed dates . . . , but left such dates
to be arranged from time to time by the instructor and his student."
Yet this "fixed date of performance" standard, it turns out,
actually has nothing whatever to do with those aspects of the taxpayers'
accounting system which the Court ultimately finds objectionable.
There is nothing in the Court's opinion to indicate
disapproval of the basic method by which income earned by the rendition of
services was recorded. On the contrary, the taxpayers' system was
admittedly wholly accurate in recording lessons given under each
individual contract. It was only in connection with lessons which had not
yet been taught that the taxpayers were "uncertain whether none, some
or all" of the contractual services would be rendered, and the
condemned "arbitrariness" therefore is limited solely to the
method by which cancellations were recognized. n12 It is, of course, true
of all businesses in which services are not rendered simultaneously with
payment that the number and amount of cancellations are necessarily
unknown at the time advances are received. But surely it cannot be
contended that a contract which specified the times at which lessons were
to be given would make any more certain how many of the remaining lessons
students would in fact demand. Indeed, the Court does not suggest that a
schedule fixing the dates of all future lessons would, if embodied in each
contract, suffice to make petitioners' accounting system "clearly
reflect income."
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n12 The Court also urges that the taxpayers' treatment
of the commissions paid to sales personnel and royalties paid to Arthur
Murray, Inc., were inconsistent with an accrual accounting system. It
should be noted that @ 1.461-1 (a)(3), Treas. Reg., 1954 Code,
specifically provides: ". . . However, in a going business there are
certain overlapping deductions. If these overlapping items do not
materially distort income, they may be included in the years in which the
taxpayer consistently takes them into account." If, however, the
Court is holding that these items do "materially distort
income," then the case should be remanded for recomputation as to
these items.
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Instead, the cure suggested by the Court for the
defect which it finds in the accounting system used by these taxpayers is
that estimated cancellations should be reported as income in the year
advance payments are received. I agree that such estimates might more
"clearly reflect income" than the system actually used by the
taxpayers. But any such estimates would necessarily have to be based on
precisely the type of statistical evaluations which the Court struck down
in the American Automobile Association case. Whatever other
artificialities the exigencies of revenue collection may require in the
field of tax accounting, it has never before today been suggested that a
consistent method of accrual accounting, valid for purposes of recognizing
income, is not equally valid for purposes of deferring income. Yet in this
case the Court says that the taxpayers, in recognizing income, should have
used the very system of statistical estimates which, for income deferral
purposes, the American Automobile decision held impermissible.
It seems to me that this decision, the third of a
trilogy of cases purportedly decided on their own peculiar facts, in truth
completes the mutilation of a basic element of the accrual method of
reporting income -- a method which has been explicitly approved by
Congress for almost half a century. n13
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n13 See @ 13 (d) of the Revenue Act of 1916, 39 Stat.
771.
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I respectfully dissent.
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