Perry Funeral Home, Inc. - Page 11

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          books, with the exception that “if the method used does not                 
          clearly reflect income, the computation of taxable income shall             
          be made under such method as, in the opinion of the Secretary,              
          does clearly reflect income.”  In general, the accrual method is            
          designated a permissible method of accounting for purposes of               
          section 446.  Sec. 446(c)(2).                                               
               Under the accrual method, income is to be included for the             
          taxable year when all events have occurred that fix the right to            
          receive the income and the amount of the income can be determined           
          with reasonable accuracy.  Secs. 1.446-1(c)(1)(ii), 1.451-1(a),             
          Income Tax Regs.  Typically, all events that fix the right to               
          receive income have occurred upon the earliest of the following             
          to take place:  The income is (1) actually or constructively                
          received; (2) due; or (3) earned by performance.  Schlude v.                
          Commissioner, 372 U.S. 128, 133 (1963); Johnson v. Commissioner,            
          108 T.C. 448, 459 (1997), affd. in part, revd. in part and                  
          remanded on another ground 184 F.3d 786 (8th Cir. 1999).                    
               As caselaw applying the above standards has evolved, it has            
          become well established that amounts constituting advance                   
          payments for goods or services are includable in gross income in            
          the year received.  Schlude v. Commissioner, supra; AAA v. United           
          States, 367 U.S. 687 (1961); Auto. Club of Mich. v. Commissioner,           
          353 U.S. 180 (1957); RCA Corp. v. United States, 664 F.2d 881 (2d           

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Last modified: May 25, 2011