Perry Funeral Home, Inc. - Page 1

                                 T.C. Memo. 2003-340                                  

                               UNITED STATES TAX COURT                                

                       PERRY FUNERAL HOME, INC., Petitioner v.                        
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 14722-02.              Filed December 16, 2003.             

                    P is a funeral home organized and operating in                    
               Massachusetts.  During the years in issue, P entered                   
               into preneed funeral contracts and received payments in                
               advance of death for goods and services to be provided                 
               later at the contract beneficiary’s death.  These                      
               payments were refundable at the contract purchaser’s                   
               request, pursuant to State law, at any time until the                  
               goods and services were furnished.  P, an accrual basis                
               taxpayer, included these payments in income not in the                 
               year of receipt but in the year in which the goods and                 
               services were provided.                                                
                    Held:  Payments received by P under its preneed                   
               funeral contracts are includable in gross income only                  
               upon the provision of the subject goods and services.                  
                    Held, further, P is liable for the sec. 6662,                     
               I.R.C., accuracy-related penalty with respect to items                 
               conceded by P, apart from the preneed accounting issue.                

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