Oakcross Vineyards, LTD., Dennis D. Groth, Tax Matters Partner - Page 21

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          Kennedy v. Commissioner, 89 T.C. 98, 103 (1987).  Although it is            
          generally acknowledged that distortions of income may result from           
          use of the cash method, Frysinger v. Commissioner, 645 F.2d 523,            
          527 (5th Cir. 1981), affg. T.C. Memo. 1980-89; Ansley-Sheppard-             
          Burgess Co. v. Commissioner, supra at 374; Rojas v. Commissioner,           
          90 T.C. 1090, 1107 (1988), affd. 901 F.2d 810 (9th Cir. 1990);              
          Kennedy v. Commissioner, supra at 103; Magnon v. Commissioner, 73           
          T.C. 980, 1004-1005 (1980), such distortions do not prevent the             
          cash method from clearly reflecting income so long as the method            
          is consistently applied and no attempt is made to unreasonably              
          prepay expenses or defer receipt of income, Ansley-Sheppard-                
          Burgess Co. v. Commissioner, supra at 375; Kennedy v.                       
          Commissioner, supra at 103-104; Magnon v. Commissioner, supra at            
          1005-1006; Van Raden v. Commissioner, 71 T.C. at 1104.  Moreover,           
          farmers are allowed great flexibility in timing the receipt of              
          income from harvested crops and may sell them in one year                   
          pursuant to a contract calling for payment in a later year.                 
          Schniers v. Commissioner, 69 T.C. 511, 520 (1977).                          
               A taxpayer, including a farmer, using the cash method of               
          accounting is ordinarily entitled to report income in the year it           
          is actually or constructively3 received, secs. 1.61-4(a), 1.451-            
          1(a), Income Tax Regs., but may not do so where application of              
          the general rule results in a material distortion of income.  See           

          3    Respondent does not contend that Vineyards was in                      
          constructive receipt of any of the amounts due it from Winery.              




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