U.S. 9th Circuit Court of Appeals Turin vs. Commissioner of Internal Revenue 9970130
Court of Appeals Upholds Tax Court's Decision in Turin -The U.S. 9th Circuit Court of Appeals recently upheld the U.S. Tax Court's decision that Jim Turin & Sons, Inc., was not required to use the accrual method of accounting to compute its federal income taxes. The Court found that, because of its physical properties, emulsified asphalt cannot be warehoused as inventory and, as such, cannot be considered "merchandise." Therefore, IRS' argument did not apply.
Methods of Accounting for Income and Expenses Significant Court Cases
Von Euw & L.J. Nunes Trucking, Inc. -A sand and gravel hauler was required to change its accounting method from cash to accrual. The taxpayer operated 20 trucks and, based on customer orders, acquired sand and gravel from suppliers and delivered to various contractors and developers. These customers used the sand and gravel to construct foundations for streets, houses, and buildings. The taxpayer had no beginning or ending inventories and maintained its books and records on the accrual method. It filed its tax return using the cash method.
Vandra Bros. Construction Co., Inc. v. Commissioner, T.C. Memo 2000-233; No. 15483-96 (Aug. 2, 2000)
The Tax Court ruled against the Commissioner with respect to a Contractor who specializes in construction of streets, sidewalks, curbs, and similar improvements. The concrete, stone, reinforcing steel and other items (collectively, the materials) used by the taxpayer were determined not to be merchandise. Since taxpayer was not engaged in the production or sale of merchandise, he was not required to use inventories and was not required to change to the accrual method of accounting.
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.
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