City of Bethel, Alaska, and Community Liquor Sales, Inc. v. United States

J. BLAINE ANDERSON, Circuit Judge:

This is an appeal from a tax refund action brought by City of Bethel, Alaska (Bethel), and Community Liquor Sales, Inc. (CLS). After a bench trial, the district court found that the revenue in question was exempt from federal income tax under section 115(a) of the Internal Revenue Code of 1954. 1 We reverse because the revenue had not accrued to Bethel and therefore was taxable income to CLS. 2

FACTS

For years Bethel has been plagued with alcohol-related problems. In 1965 the citizens of Bethel voted to prohibit the sale of alcohol in the City. The problems…