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consider whether petitioner may do so under section 1.451-5,
Income Tax Regs.
B. Whether Eagle May Defer Reporting of Advance Deposits If
Section 1.451-5, Income Tax Regs., Does Not Apply
1. Standards Applicable If Section 1.451-5, Income Tax
Regs., Does Not Apply
Income must be reported in the taxable year in which the
taxpayer receives it unless, under the taxpayer's method of
accounting, the item of income is properly accounted for in a
different period. Sec. 451(a). Petitioner is an accrual method
taxpayer. Accrual method taxpayers generally must recognize
income when all the events have occurred which fix the right to
receive the income and the amount of the income can be determined
with reasonable accuracy. Schlude v. Commissioner, 372 U.S. 128,
137 (1963); secs. 1.446-1(c)(1)(ii), 1.451-1(a), Income Tax Regs.
Accrual basis taxpayers must include in income in the year
received advance payments for the sale of services that are
unrestricted as to their use, even though those payments may not
be earned until later years. Schlude v. Commissioner, supra;
American Auto. Association v. United States, 367 U.S. 687, 689
(1961); Automobile Club of Michigan v. Commissioner, 353 U.S.
180, 189 (1957). The same principles apply to advance payments
for the sale of goods. S. Garber, Inc. v. Commissioner, 51 T.C.
733, 735-736 (1969); Hagen Adver. Displays, Inc. v. Commissioner,
47 T.C. 139, 146-147 (1966), affd. 407 F.2d 1105, 1107 (6th Cir.
1969); Farrara v. Commissioner, 44 T.C. 189, 191 (1965).
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