The Charles Schwab Corporation and Includable Subsidiaries - Page 30

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          to 1972, California corporations could not generally have accrued                  
          franchise tax based on an "income year" until the first day of                     
          the following "taxable year".  While the revenue ruling is based                   
          in part on our holdings in Central Inv. Corp. v. Commissioner, 9                   
          T.C. 128 (1947), and Epoch Food Serv., Inc. v. Commissioner, 72                    
          T.C. 1051 (1979), those cases did not address the effect of                        
          section 23222(a) of the California code on the accruability of                     
          California franchise tax in a corporation's second taxable year                    
          where the first taxable year was less than 12 months.11  The                       
          impact of section 23222(a) on the case before us is a "fact"                       
          determining whether the all events test has been met.                              
          Petitioner's initial misconstruction of the facts in reliance on                   
          respondent's revenue ruling should not be viewed as a method of                    
          accounting other than the accrual method.  Applying petitioner's                   
          method of accounting to the correct facts is not a change in                       
          accounting method requiring respondent's approval.  We hold that                   
          petitioner is entitled to accrue and deduct franchise tax in the                   
          amount of $932,979 for purposes of computing its Federal income                    
          tax for the taxable year ended December 31, 1988.                                  


                                                      Decision will be entered               
                                                 under Rule 155.                             

                11We note that the facts described in Rev. Rul. 79-410,                      
          1979-2 C.B. 213, 213-214, address the impact of California law                     
          prior to the 1972 amendment where a corporation's first year was                   
          "other than a short year".  (Emphasis added.)                                      




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