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Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 1989, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
After settlement, the primary issue for decision is the
proper accrual in petitioner's taxable year ending February 28,
1989, of amounts billed but not received under a long-term
construction contract.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner is an Alabama corporation with its principal
place of business in Birmingham, Alabama. Petitioner is engaged
in the construction of industrial plants and buildings.
Petitioner's taxable year ends on February 28 of each year.
In early 1987, Clinch River Corp. (Clinch River)
incorporated for the purposes of purchasing, renovating, and
operating a paper mill that it purchased later that year. In
October of 1987, Clinch River hired petitioner to substantially
renovate the mill. The mill had been built in the early 1900's
but had been closed in 1985 upon bankruptcy of the former owner
and operator of the mill.
Under the long-term, cost-plus contract that was entered
into on October 23, 1987, between Clinch River and petitioner
(October 1987 contract), Clinch River was to reimburse petitioner
the costs of labor, materials, and subcontractor fees, and to pay
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