Mark N. Wright and Erica Y. Wright - Page 23

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          United States v. Gen. Dynamics Corp., 481 U.S. 239, 243-244                 
               A deduction shall be taken for the year which is the proper            
          year under the taxpayer’s method of tax accounting.  Sec. 461(a).           
          It is not entirely clear what method of accounting Wright &                 
          Associates was using for its 1999, 2000, and 2001 taxable years.            
          Both cash and accrual method were checked on Schedule B of Wright           
          & Associates’ 1999, 2000, and 2001 Forms 1120S.  Mr. Wright                 
          indicated at trial that the returns were in error and that Wright           
          & Associates was on the accrual method.  However, Wright &                  
          Associates had no trade notes or accounts receivables on its                
          balance sheets or Schedule L of Forms 1120S for 1999, 2000, or              
          2001.  Mr. Wright noted that hypothetically a business could be             
          on the accrual method and have no trade notes or accounts                   
          receivables if they were all paid or collected.  Based on Wright            
          & Associates’ lacking any trade notes or account receivables on             
          its 1999, 2000, and 2001 balance sheets and Schedule L of its               
          Forms 1120S, the Court concludes that Wright & Associates,                  
          despite Mr. Wright’s knowledge of tax and accounting, had no                
          consistent method of accounting.                                            
               Mr. Wright contends that Ms. Mohr’s claim, although not made           
          against Wright & Associates, was a liability of that corporation,           
          which reduced its income for 1999 by $50,000, and as a result,              
          reduced petitioners’ 1999 taxable income by the same amount.  It            

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