Cordes Finance Corporation - Page 17

                                                - 17 -                                                   
                      outstanding at the end of 1990 be recognized as                                    
                      income in 1990.  [Petitioner] objected to this                                     
                      proposed change in accounting because it required                                  
                      the inclusion in income in 1990 of interest on                                     
                      installment note payments that are not due at                                      
                      the end of 1990 and won't be due for months or                                     
                      even years in the future.                                                          

                According to petitioner, respondent has, in effect, placed                               
                petitioner on an erroneous method of accounting to the                                   
                extent that respondent computes petitioner's income by                                   
                reference to unearned interest and has, thus, exceeded her                               
                authority to change petitioner's method of accounting under                              
                section 446(b).                                                                          
                      We disagree.  Neither the purpose nor the necessary                                
                effect of respondent's adjustment is to include in                                       
                petitioner's gross income for 1990 interest that will                                    
                accrue after 1990.  As described above, petitioner treated                               
                interest as having been earned only when a loan was fully                                
                paid off or petitioner repossessed the automobile securing                               
                the loan and the loan was closed on petitioner's books.                                  
                The change of accounting method that was made by respondent                              
                is to require interest to be ratably included in                                         
                petitioner's income over the life of the loan.  Based upon                               
                petitioner's records of loans outstanding at the end of                                  
                1990, respondent's agent found that interest in the amount                               
                of $3,084,179 had been earned through the end of 1990.                                   
                Petitioner does not attack that computation.                                             





Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011