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gross receipts $250,378 attributable to accounts receivable at
the beginning of the year and included $196,916 attributable to
accounts receivable at the close of the year. The amount of
receivables, however, was determined by compiling amounts
reflected on customer account cards.
Accrual method taxpayers recognize income when "all the
events have occurred which fix the right to receive such income
and the amount thereof can be determined with reasonable
accuracy." Sec. 1.446-1(c)(1)(ii), Income Tax Regs.
Generally, under the "all events" test, accrual method
taxpayers recognize income when it is paid, due, or earned,
whichever occurs first. See, e.g., Schlude v. Commissioner,
372 U.S. 128, 133 n.6 (1963).
As discussed above, the breakdown of the work in process
at the end of the year included amounts that had been earned,
even though not billed to the client. Those amounts were
accounts receivable at the close of the taxable year.
Consequently, gross receipts should have been increased by
those amounts. Similarly, any portion of the work in process
at the beginning of the year representing completed work that
had been shipped by the close of the previous tax year properly
was a receivable attributable to the prior taxable year.
Consequently, gross receipts should have been reduced by that
amount.
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