-77- charge was purposely made higher than the value of the old core to be returned, in order to induce customers to return old cores and to enable Burrell to maintain a needed inventory of old cores. Burrell did not strictly enforce the 45-day limit, but accepted old cores tendered to him for credit by customers a considerable time after the 45-day period had expired. The effect of a transaction between Burrell and a customer was a charge against the customer in one amount, reflected on the bill delivered to him, made up of two items, one being Item One, the charge for the rebuilt engine with a rebored core sold to the customer, payable in cash, and which most customers paid on receipt of the bill; and the other, Item Two, to be paid by the return of a like core to Burrell within 45 days, or if not returned within 45 days, to be paid in full, in cash. The reason Burrell did not strictly enforce the 45-day time limit was that he preferred old cores to cash. Burrell carried on his books an account referred to as "Customer Core Deposits." It reflected the amounts of Item Two charges which customers would have to pay in cash if they failed to discharge them by the return of an old core. * * * On November 1, 1962, the Corporation [Engine Rebuilders, Inc.] was organized under the laws of Colorado. On that date, the Corporation, which was wholly owned by the Burrells, took over the wholesale business of Burrell. * * * The Corporation continued to use the same billing and invoice procedures; the same "Customer Core Deposits" account, and generally the same bookkeeping methods that the Burrells had followed. Burrell v. Commissioner, supra at 683 (fn. ref. omitted). (We shall refer to Burrell and the Corporation collectively as the taxpayers.) The issue in Burrell v. Commissioner, supra, was whether the taxpayers were required to include the so-called item two charge in income at the time they sold a rebuilt engine. Unlike thePage: Previous 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 Next
Last modified: May 25, 2011