ACCOUNTING METHODS
See also INCOME and TAXES.
Accrual Method-Prepaid Tuition-Claim of Right.-Dancing school
partnership must, as determined by Commissioner, report in year of receipt
prepaid tuitions for instructions to be given in that and succeeding years,
partners having unrestricted use and disposition of such payments under
claim of right, although accrual method and consequent deferral of portion
of payments may have been consonant with general commercial accounting
practice which must bow to established rule of law in determination of
taxable income. Curtis R. Andrews__
Cash Method-Deductions-Declared Value Excess-Profits Tax-Due
but Unpaid.-Petitioner corporation, cash basis taxpayer, is not entitled to
deduction for declared value excess-profits tax, determined in deficiency
notice to be due but unpaid, in computing its income and excess profits
tax liability. Eugene Vassallo_-
Change of Method-Farmers.-No authority exists under the law for
petitioners' (farmers) proposal that Tax Court should compute their in-
come on more beneficial cash basis in treatment of sale of breeding animals,
petitioners having regularly kept their books and records and reported
income on accrual basis. Estate of C. A. Smith__.
Change of Method-Accrual to Installment-Deferred Payment Trans-
action. Sales arrangement made in 1948, whereby accrual basis corpora-
tion, not regularly selling on installment plan, agreed to accept notes
payable over 2-year period in lieu of cash payment provided in contract,
was a completed present sale with payment deferred, not an installment
sale, and proceeds received in 1949 were not includible under sec. 44 (c)
(1939 Code) in corporate income for 1949, the year of changeover from
accrual to installment basis. Louis Greenspon_.
Change of Method-Estoppel.-Commissioner cannot be estopped from
making recomputation pursuant to accrual accounting method because of
failure to object to taxpayer's prior hybrid method of reporting income.
Caldwell v. Commissioner, 202 F. 2d 112. Harry Hartley- -
Hybrid Method.-Petitioners (engaged in buying, rebuilding, and selling
old motor blocks) used accrual method for all purchases, sales, and ex-
penses; maintained inventories for all new parts and materials; but did not
inventory old and rebuilt blocks in computing income. Commissioner's
determination that accrual method, taking account of blocks, must be used,
sustained, because hybrid method more closely resembled accrual and,
under Regs. 111, sec. 29.22 (c) (1), inventories are required in every case
where production, purchase, or sale of merchandise is an income-producing
factor. Harry Hartley.
Installment Method-Personal Property-Installment Sales.-Corpora-
tion, selling industrial pipe, met requirements of sec. 44 (a) (1939 Code)
of regularly selling personal property on installment basis, although bulk
and frequency of sales was not considerable, inasmuch as substantial
portion of gross proceeds from sales during the year was from installment
sales, which is as significant a factor as number of sales in this type of
business, and corporation had continually held itself out as selling on this
basis. Louis Greenspon_.
Sec. 102 Surtax-Beyond Business Needs-Avoidance of Tax.-Imposi-
tion for 1949 of sec. 102 (1939 Code) surtax sustained as to continually
prosperous corporation, which, having paid no dividends, had accumulated
surplus beyond reasonable business needs; purpose of avoiding surtax on
shareholders was not negatived by showing alleged need of funds for ex-
pansion, insuring adequate source of supply, reserve for certain con-
tingencies, and purchase of business location. Contra as to 1950 when
dividend, taxes, and large loan to major stockholder left only small re-
siduum to be added to surplus. Al Goodman, Inc.-