Colonial Wholesale Beverage Corporation v. Commissioner of Internal Revenue

This appeal concerns the federal income tax treatment of beverage can deposits (5$ per can) collected by a beverage wholesaler pursuant to the Massachusetts bottle deposit law, Mass.Gen.Laws ch. 94, §§ 321-327 (1986). First, the taxpayer argues that these deposits need not be considered income, but instead can be treated as liabilities in an accounting reserve. Second, the taxpayer argues that if the deposits are deemed to be income, then the taxpayer should be entitled to a deduction in the current year for those deposits that it expects it will have to return.

The Tax Court rejected both of…