RACMP Enters. v. Commissioner
United States Tax Court
P is a construction contractor that enters into contracts to construct, place, and finish concrete foundations, driveways, and walkways for real property developers. P uses the cash method to recognize income and to expense the cost of concrete and other materials. R determined that the material P uses in providing service to its clients is "merchandise" under sec. 1.471-1, Income Tax Regs., and that P must report its income on the accrual method of accounting.
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P is a construction contractor that enters into contracts to construct, place, and finish concrete foundations, driveways, and walkways for real property developers. P uses the cash method to recognize income and to expense the cost of concrete and other materials. R determined that the material P uses in providing service to its clients is "merchandise" under sec. 1.471-1, Income Tax Regs., and that P must report its income on the accrual method of accounting. HELD: P's contract to provide labor and material to a real property developer is a contract to provide service, and the material is…
1Opinion of the Court
Parr, Judge:*
Respondent determined an $82,577 income tax deficiency for petitioner’s tax year ended August 31, 1994, and a section 66621 accuracy-related penalty of $16,515.
The issues for determination are: (1) Whether the material provided by petitioner in accordance with its contract to construct and place concrete foundations, driveways, and walkways is merchandise within the meaning of section 1.471-1, Income Tax Regs. We hold it is not. (2) Whether respondent abused his discretion in determining that petitioner’s use of the cash method of accounting did not clearly reflect its income. We…
2Cases cited50 opinions
- Lucas v. American Code Co.Supreme Court of the United States · 1930
- Thor Power Tool Co. v. CommissionerSupreme Court of the United States · 1979
- Commissioner v. HansenSupreme Court of the United States · 1959
- Aced v. Hobbs-Sesack Plumbing Co.California Supreme Court · 1961
- McCaughn v. LudingtonSupreme Court of the United States · 1925
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