John Marshall Harlan II

“ The collection of taxes clearly should not be made to depend on the vicissitudes of litigation with third parties in which the taxpayer may be engaged. That is quite a different thing, however, from holding that the Commissioner may force taxpayers to abandon reasonable and accurate methods of accounting simply because they do not reflect advance receipts as income in the year received. ”

“ Under § 41 of the Internal Revenue Code of 1939, [4] the income of the taxpayer is to be determined 'in accordance with the method of accounting regularly employed in keeping the (taxpayer's) books,' unless 'the method employed does not clearly reflect' the taxpayer's income. Under § 42, [5] items of gross income need not be reported in the taxable year in which received by the taxpayer if, 'under methods of accounting permitted under section 41, any such amounts are to be properly accounted for as of a different period.' And it is clear that accrual methods of accounting may be employed. ”

“ The Commissioner's own regulations authorize the deferral of income in some instances. [6]
The Court, however, now by-passes the Commissioner's 'claim of right' argument, and rests its decision instead on the ground that the 'pro rata allocation of the membership dues in monthly amounts is purely artificial and bears no relation to the services which petitioner may in fact be called upon to render for the member,' so that it cannot say that in doing what he did the Commissioner exceeded the limits of his discretion. ”