Tampa Bay Devil Rays, Ltd., Naimoli Baseball Enterprises, Inc., Tax Matters Partner - Page 14




                                       - 14 -                                         
          and 1996.  Respondent treated the $125,000 sponsor fee received             
          in 1996 as income to the partnership for 1996.                              

                                       OPINION                                        
               Section 451 provides the general rule that items of income             
          are to be included in taxpayers’ income in the year of receipt,             
          unless the items of income are properly includable in a different           
          year under the taxpayers’ method of accounting.  Section 446                
          provides generally that taxpayers are to compute taxable income             
          using the method of accounting that they use in computing income            
          for book purposes, unless such method does not clearly reflect              
          income.                                                                     
               Under section 446(c), the accrual method is a permissible              
          method of accounting.  Sec. 446(c)(2).                                      
               Specifically, under the accrual method of accounting, where            
          funds are received by taxpayers as deposits on services to be               
          rendered in the future the funds generally are to be included in            
          the taxpayers’ income in the year of receipt, as opposed to being           
          deferred until the year in which taxpayers perform the related              
          services.  See Schlude v. Commissioner, 372 U.S. 128 (1963);                
          AAA v. United States, 367 U.S. 687 (1961); Auto. Club of Mich. v.           
          Commissioner, 353 U.S. 180 (1957).                                          
               In both Auto. Club of Mich. v. Commissioner, supra (Auto.              
          Club), and AAA v. United States, supra, accrual basis taxpayers             
          included prepaid membership dues they received in income ratably            





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  Next

Last modified: May 25, 2011