- 4 -
following items: (1) Income tax attributable to unrealized and
unrecognized installment sale proceeds (if correct, this
adjustment would result in no accumulated earnings tax
liability); (2) the amount of the income tax deficiency either
determined by respondent or decided by this Court (resulting in
no liability or $13,666 in accumulated earnings tax,
respectively); and (3) an increased reduction under section
535(b)(6), if any accumulated earnings tax liability results
after our consideration of proposed adjustments (1) and (2).
I. Tax Liability on Installment Sale Income To Be Received in
Years After 1995
Section 531 imposes a tax on a corporate taxpayer’s
accumulated taxable income. Accumulated taxable income is
computed by making certain adjustments to a corporate taxpayer’s
taxable income. Sec. 535(a). In particular, section 535(b)(1)
permits a deduction for Federal income tax “accrued during the
taxable year”. In approaching this deduction, petitioner argues
that its tax liability on unrealized and unrecognized installment
sale income had accrued. This issue is one of first impression
in the context of computing accumulated taxable income.
During its 1995 tax year, petitioner sold improved real
property. The gross profit from the sale was $1,569,211.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011