The Charles Schwab Corporation and Includable Subsidiaries - Page 14

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                Petitioner elected a calendar taxable year for California                    
          income and franchise tax purposes.  Petitioner’s first Federal                     
          taxable year ended on March 31, 1988, but petitioner changed its                   
          Federal taxable year to a calendar year for its second and                         
          subsequent years.                                                                  
                Petitioner reported California franchise tax in the amount                   
          of $879,500 on its first California Franchise or Income Tax                        
          Return (Form 100) for the income year ending December 31, 1987,                    
          and paid such amount with its return.  Petitioner deducted this                    
          amount on its Federal return filed for the taxable year ended                      
          March 31, 1988.                                                                    
                For the income year ending December 31, 1988, petitioner                     
          reported California franchise tax in the amount of $932,979 on                     
          its second California Franchise or Income Tax Return (Form 100)                    
          and paid such amount with its return.  On its Federal return                       
          filed for the taxable year ended December 31, 1988, petitioner                     
          did not deduct the franchise tax that it paid for California                       
          income year 1988.  Petitioner now claims that this was an error                    
          and that it should be entitled to deduct the 1988 franchise tax                    
          for its taxable year ended December 31, 1988.                                      

                                          OPINION                                            

          Commission Income Issue                                                            
                The first issue we must decide is whether petitioner, an                     
          accrual basis taxpayer, must accrue brokerage commission income                    




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