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days, and all jobs are completed within 5 days. Completed orders
are immediately shipped to the customer.
IC maintains both its income tax and its financial
accounting records on the cash/hybrid method of accounting and
has used that method since its incorporation. The cash/hybrid
method of accounting is the standard method of accounting for
this type and size of company. IC has not attempted to prepay
expenses or defer the recognition of income.
IC timely filed its 1994 income tax return. On that return,
IC reported gross receipts of $1,176,035 and claimed cost of
goods sold of $822,946, of which $525,861 (or 44.7 percent of
gross receipts) consisted of purchases.
Respondent determined that IC should be required to use the
accrual method of accounting because its cash/hybrid method did
not clearly reflect its income. Respondent's determination
served to increase IC's ordinary income. Thereafter, respondent
issued separate notices of deficiency, each dated November 7,
1997, to petitioners determining deficiencies in petitioners'
Federal income taxes for 1994 in the following amounts:
Docket No. Deficiency
2396-98 $6,019
2397-98 3,611
2464-98 5,070
By separate petitions, each filed on February 9, 1998,
petitioners commenced their cases in this Court. Respondent
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