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costs that were in the taxpayer’s possession at the close of the
year. Interpreting Indianapolis Power & Light Co., the Court of
Appeals agreed with the taxpayer.
Respondent claims that the outcome of this case should,
instead, be controlled by Brown v. Helvering, 291 U.S. 193
(1934). The taxpayer in Brown was an insurance agent who
received a commission from premiums paid on insurance policies.
The insurance policies included a right of cancellation, which,
when exercised, required the insurance company to refund the
premiums paid. In the event of cancellation, the taxpayer was
required to refund to the insurance company a portion of the
commission he had received with respect to a canceled policy. On
his books, the taxpayer recorded an estimate of his future
liability to refund commissions and sought to exclude the
estimate from gross income. The Court rejected the argument of
the taxpayer stating that “the mere fact that some portion of
* * * [the commissions] might have to be refunded in some future
year in the event of cancellation or reinsurance did not affect
its quality as income.” Id. at 199.
The situation of Florida Power is distinguishable from that
of the insurance agent in Brown. Brown dealt with contingent
liabilities that may or may not have vested in future years. In
making his estimates, the taxpayer had no idea which policies, if
any, might cancel creating a liability on his part, nor did he
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