Molsen v. Commissioner
United States Tax Court
M, a cotton merchant, employs the accrual method of accounting and reports its income on a calendar year basis. Some of the cotton is purchased by M through on-call contracts, under which cotton is delivered to M and a provisional price is paid to the seller, but the purchase price remains open until the seller exercises his call right, fixing the price. The purchase price is tied to the market price of cotton futures prevailing at the time the seller calls the contract.
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M, a cotton merchant, employs the accrual method of accounting and reports its income on a calendar year basis. Some of the cotton is purchased by M through on-call contracts, under which cotton is delivered to M and a provisional price is paid to the seller, but the purchase price remains open until the seller exercises his call right, fixing the price. The purchase price is tied to the market price of cotton futures prevailing at the time the seller calls the contract. In accordance with generally accepted accounting principles and industry-wide practice, M has consistently accounted for…
1Opinion of the Court
Simpson, Judge:
The Commissioner determined deficiencies in the petitioners’ Federal income taxes for 1977 as follows:
Docket No. Petitioner Deficiency
22699-82 Heinz Molsen, Jr., and Christina T. Molsen $243,048
Frederick G. Molsen and Jayne F. Molsen 22700-82 243,048
Peter F. Kandel and Barbara M. Kandel 22701-82 243,047
Elizabeth Molsen 22702-82 40,483
The issues for decision are: (1) Whether the Commissioner abused his discretion under section 446(b) of the Internal Revenue Code of 19542 in determining that a cotton merchant that values its ending inventory at market may not accrue an estimated…
2Cases cited39 opinions
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