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Pierce Estates, Inc. v. Commissioner, 195 F.2d 475, 477 (3d Cir.
1952), revg. on the facts 16 T.C. 1020 (1951).
Respondent cites Spring City Foundry Co. v. Commissioner,
292 U.S. 182 (1934), for the proposition that an absolute rule
exists that once an accrual method taxpayer has earned income,
the income must immediately be accrued, and subsequent events
occurring within the same year affecting collectibility of the
income can never justify nonaccrual of the income in that year.
Respondent’s interpretation of Spring City Foundry Co. v.
Commissioner, supra, is not followed by the above-cited case
authority, and we do not so interpret it herein.
In the instant case, the record establishes that by
November 23, 1988 (the date of the November 1988 contract),
Clinch River's obligation to pay petitioner the $600,000 in issue
had become contingent and, by February 28, 1989, of very doubtful
collectibility. The unprofitability of the mill, the low level
of production of the mill, and the serious financial condition
and apparent insolvency of Clinch River, make clear the strong
unlikelihood that petitioner would receive a payment under the
two contingent provisions of the November 1988 and the February
1989 contracts with Clinch River. No realistic prospect of a
sale of the mill was evident, and, in light of the failure to
mention, in the February 1989 contract, the sale provisions of
the November 1988 contract, those provisions appear not to have
been included in the February 1989 contract.
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