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O. Liquidating Corp., 292 F.2d 225 (3d Cir. 1961), revg. T.C.
Memo. 1960-29. In O. Liquidating Corp., the taxpayer corporation
received annual dividend payments which were attributable to
insurance company surpluses earned in a prior year, but which
were declared and distributed after the close of that year. The
taxpayer recorded the dividends in its accounts in the year of
the surpluses rather than in the year the dividends were declared
and paid. Both the taxpayer and the Commissioner agreed that--
pursuant to the taxpayer’s otherwise applicable accrual method of
accounting--these dividends should have been reported in the year
of their declaration and payment. The court found, however, that
regardless of the impropriety of this treatment under the
taxpayer’s overall accrual method, the taxpayer was required to
obtain consent before correcting the error.
The opinion in O. Liquidating Corp. is controlling in this
case: Even if BMP was correcting the application of an overall
cash method of accounting, it was nevertheless a change in its
method of accounting which required the consent of the Secretary
4(...continued)
this case would be appealable to the U.S. Court of Appeals for
the Third Circuit. See sec. 7482(b)(1)(A). This Court generally
applies the law in a manner consistent with the holdings of the
Court of Appeals to which an appeal of its decision lies, see
Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985
(10th Cir. 1971), even in cases subject to sec. 7463(b).
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