Owen J. Roberts

“ It is settled beyond cavil that taxpayers other than insurance companies may not accrue receipts and treat expenditures on a cash basis, or vice versa. Nor may they accrue a portion of income and deal with the remainder on a cash basis, nor take deductions partly on one and partly on the other basis. Congress, we think, did not intend to make an exception of insurance companies. If they are not allowed to account on an accrual basis for interest owed them, there is no reason for permitting them to treat interest owed by them on any different basis. ”

“ In this view, the transaction is said to come within the term 'paid,' and we may disregard the word 'accrued.' This regulation has, however, not been applied in any case where income has been credited to another by a taxpayer employing the cash receipts and disbursements method of accounting; and specifically it has not been invoked to require policyholders to report as income the dividends or interest credited to them in cases such as this. No tax is demanded of them until actual receipt of the money. The constructive payment theory is, we think, untenable. ”

“ Hence it is claimed the words 'paid or accrued,' as applied to interest, cannot grant an option in the matter of returns, depending upon whether the insurance company keeps its accounts on a cash basis or on an accrual basis, as in the case of other taxpayers, since the company has no choice in this respect; that the word 'accrued' cannot be read out of the statute or left without meaning or effect; and that the phrase is employed to describe and allow deduction of interest accrued on dividends left with the company. ”