Charles Evans Whittaker

“ Though the funds are not presently available to the taxpayers for the payent of taxes, they are nevertheless owned by the taxpayers, and the latter cannot expect to collateralize their liabilities, for periods running from 1 to 5 years, by the use of their accrued but untaxed funds. Moreover, it is a normal result of the accrual basis of accounting and reporting that taxes frequently must be paid on accrued funds before receipt of the cash with which to pay them, just as the Ninth Circuit stated in the Hansen case, 258 F.2d at page 587. ”

“ Respondents in No. 380, John R. Hansen and Shirley G. Hansen, are husband and wife and filed joint federal income tax returns for the taxable years 1951, 1952 and 1953 here involved. During those years, John R. Hansen ('taxpayer') , was a motorcar dealer in Bellevue, Washington, and kept his books on the accrual basis. He frequently sold automobiles on 'time payments.' The taxpayer was not bound by any contract to sell his installment paper, but because of his needs for operating capital he consistently sold it to General Motors Acceptance Corporation ('GMAC') . ”

“ The dealers involved in these cases recorded on their books in the years the installment paper was sold, and included in their income tax returns for those years, the cash received from the finance companies, but they did not accrue on their books or include in their returns he percentage of the price that was retained by the finance companies and credited to their reserve accounts. ”

“ Inasmuch as these records show that the payout period for automobiles varies from 12 to 36 months and for house trailers from 36 to 60 months, it is doubtless true that the taxpayers, having pledged their reserve accounts to the finance companies as collateral security, cannot prsen tly compel the finance companies to pay over their reserves. ”

“ Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 729, 49 S.Ct. 499, 504, 73 L.Ed. 918; Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 62, 80 L.Ed. 3; Tressler v. Commissioner, 9 Cir., 228 F.2d 356, 359, note 6.↑ Section 42 (a) (as amended by § 114, Revenue Act of 1941, c. 412, 55 Stat. 687) , 26 U.S.C. (1952 ed.) § 42, 26 U.S.C.A. § 42, so far as pertinent, provides:↑ The first publication of its views was in G.C.M. 9571, X 2 Cum.Bull. 153 (1931) . ”