- 15 - on the trade date or on the settlement date. Neither party cites, nor did we find, any cases directly on point.5 The question of when an accrual basis securities broker must accrue commissions earned on securities transactions appears to be one of first impression. Petitioner kept its books and records and filed its income tax returns using the accrual method of accounting. Under the accrual method, income is to be included for the taxable year when (1) all the events have occurred that fix the right to receive such income, and (2) the amount can be determined with reasonable accuracy. Secs. 1.446-1(c)(1)(ii), 1.451-1(a), Income Tax Regs. The parties do not dispute that the second prong of the test--that the amount of the commissions can be determined with reasonable accuracy--is met as of the trade date. Our discussion is thus limited to whether petitioner had a fixed right to receive the commission income as of that date. Under the all events test, it is the fixed right to receive the income that is controlling and not whether there has been actual receipt thereof. Spring City Foundry Co. v. Commissioner, 292 U.S. 182, 184-185 (1934). The taxpayer’s right to receive income is fixed upon the earliest of (1) the taxpayer’s receipt 5We note that in Rev. Rul. 74-372, 1974-2 C.B. 147, the IRS ruled that a stock brokerage business using the accrual method of accounting must accrue commission income on the trade date, rather than on the settlement date. Respondent's position herein is consistent with this ruling.Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
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