- 7 - of such balances grew to $1,049,610. Gross sales during the 1996 taxable year were $40,045,119.4 Money received by petitioner which gave rise to a customer credit balance was deposited to petitioner’s general non-interest-bearing bank account. The funds in this bank account were available to and used by petitioner for regular operating needs. Although petitioner did not maintain a separate account for funds attributable to the customer credit balances, such amounts were reflected as a liability on petitioner’s general ledger for financial accounting purposes. Petitioner’s Method of Accounting and Respondent’s Determination In the course of an audit of petitioner’s 1989 taxable year, respondent determined that petitioner was required to include in income the amount of customer credit balances that had been outstanding for 2 years or more. During the years at issue, petitioner continued this practice by including in income for financial and tax accounting purposes the amounts represented by customer credit balances which had aged for 2 years.5 By way of 4 The record does not reflect what portion of the credit balances were attributable to customer returns as opposed to customer overpayments. 5 Petitioner nonetheless continued to consider the amounts of the customer credit balances that were brought into income as (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011