Chesapeake Financial Corp. v. Commissioner

Petitioner, an accrual basis taxpayer, was a mortgage banker who received commitment fees from borrowers for securing commitments from institutional investors for permanent financing of commercial projects. After petitioner obtained a commitment from an investor, it issued its own commitment to the borrower. The commitment fee from the borrower was due and payable when the borrower accepted petitioner's commitment and was received by petitioner either at that time or shortly thereafter. Petitioner deferred recognition of these fees until the permanent loan was funded. Held: Petitioner must…