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deferred interest of $1,596,968 more than the amount
recorded on petitioner's loan ledger cards. In order to
reconcile this discrepancy, and to bring the balance of
petitioner's deferred interest account in line with the
ending balance computed by respondent from petitioner's
loan ledger cards, viz $3,091,395.88, respondent increased
petitioner's income in the amount of $1,596,968. The
effect of both elements of respondent's adjustment on
petitioner's deferred interest account can be summarized
as follows:
Deferred interest--ending
balance per tax return $7,772,543.00
Less: Earned interest
per respondent 3,084,179.12
Less: Amount to reconcile
discrepancy in deferred
interest amount 1,596,968.00
Deferred interest--ending
balance per loan ledger cards 3,091,395.88
Petitioner objects to the second element of
respondent's adjustment. Petitioner's position is that
this element has the effect of requiring petitioner to
include in its income for 1990 interest that would
otherwise not accrue until after 1990. Petitioner's
post-trial brief states as follows:
The Commissioner's proposed method of accounting
requires that any interest which has not already
been recognized and which could possibly be
earned at any time in the future on any contract
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