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of computing taxable income. Sec. 446(c)(2). Section 1.446-
1(c)(ii), Income Tax Regs., provides:
Accrual method. Generally, under an accrual
method, income is to be included for the
taxable year when all the events have occurred
which fix the right to receive such income and
the amount thereof can be determined with
reasonable accuracy. * * *
The accrual method does not focus on the time of payment or
receipt, but rather upon the time there is an obligation to pay or
a right to receive. See United States v. Hughes Properties, Inc.,
476 U.S. 593, 599 (1986); Spring City Foundry Co. v. Commissioner,
292 U.S. 182, 184-185 (1934).
Petitioner, an accrual method taxpayer, booked all its sales
at the time the merchandise was shipped. At that time, petitioner
had a legally enforceable right to receive payment for the
merchandise. At the end of the year, petitioner decided the amount
of rebates it would extend and reversed the sales entries, thereby
not accruing the sales income previously booked. Under the all-
events test, petitioner was required to accrue the income in the
year the sales were made to its related entities.
Petitioner failed to prove that the amounts were not
collectible during the years at issue. Furthermore, any
uncertainty as to collection that would justify nonaccrual of
income must be substantial and not simply technical. See Stephens
Marine, Inc. v. Commissioner, 430 F.2d 679, 685 (9th Cir. 1970),
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