- 18 - Noting that the taxpayer was not obligated to make additional purchases under the settlement agreement and that receipt of the total discount was not certain, the Board held that the taxpayer's income would not be accurately reflected were it required to accrue the full amount of the potential discount prior to receipt. Id. at 384. We find the decision in John Graf Co. v. Commissioner, supra, of little relevance to the present dispute. The John Graf Co. case addressed the issue of whether discounts not yet received should be accrued in income;9 it did not address the issue of whether recognition of discounts actually received subject to a contingent repayment obligation could be deferred. As to this latter issue, it is well settled that contingent repayment obligations do not operate to defer the recognition of income: If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent. * * * [N. Am. Oil Consol. v. Burnett, 286 U.S. 417, 424 (1932).] 9 A number of the purchase contracts at issue in the present case contained provisions for additional discounts to be paid if Westpac met certain volume purchase targets. Unlike the Commissioner's position in John Graf Co. v. Commissioner, 39 B.T.A. 379 (1939), respondent does not contend that those future discounts should be accrued in income prior to their receipt.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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