Salem Packing Co. v. Commissioner
United States Tax Court
A parent company which had consistently computed its income on an accrual basis, organized a subsidiary to engage in livestock raising. The subsidiary reported its income on the cash basis. The parent and subsidiary filed consolidated returns, the parent's income being reported on an accrual basis and the subsidiary's on the cash basis.
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A parent company which had consistently computed its income on an accrual basis, organized a subsidiary to engage in livestock raising. The subsidiary reported its income on the cash basis. The parent and subsidiary filed consolidated returns, the parent's income being reported on an accrual basis and the subsidiary's on the cash basis. Held, sec. 1.1502-44A, Income Tax Regs., is valid, and since the parent and subsidiary did not obtain consent of the Commissioner to use different methods of accounting in filing a consolidated return or show that the consolidated income was clearly reflected…
1Opinion of the Court
Scott, Judge:
Respondent determined deficiencies in petitioners’ consolidated corporate income taxes for the fiscal years ended May 28, 1965, and May 27, 1966, in the amounts of $142,727.89 and $18,681.80, respectively.
The issues for decision are:(1) Was Winston Farms, without consent of the Commissioner, entitled to report its income for its fiscal years ended May 28,1965, and May 27,1966, on the cash basis of accounting while filing consolidated returns with its parent corporation, Salem Packing Co., which reported its income for these and prior years on an accrual basis?(2) If respondent…
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