INDEX-DIGEST Page ACCOUNTING METHODS See also INCOME and INSURANCE COMPANIES. Allocation of Income Among Corporations-Imputed Interest on Loans-Requisite Common Control.-Where petitioner corporations had equal ownership and control of corporation organized to construct and operate enclosed mall shopping center adjacent to their department stores, Commissioner could not utilize sec. 482 to impute interest income to petitioners on loans made to corporation, since (1) petitioners and corporation were not controlled by same interests, shareholders in each petitioner were not related, and each petitioner had only 50% interest in corporation, and (2) Commissioner's contention, that requirement was satisfied because petitioners had common interest whereby they should be considered as partnership, was unwarranted interpretation of statutory language, Congress clearly having in mind control of 2 or more businesses by same interest. Lake Erie & Pittsburgh Railway Co., in which Commissioner acquiesced for 20 years, reaffirmed. B. Forman Co‒‒‒‒‒‒ Bonus to Production Employees-Allocability of Part to Inventory as Labor Cost-Discretionary or Obligatory Distribution of Profits.-Commissioner properly allocated to petitioner corporation's inventory under sec. 446 portion of yearend bonus incentive compensation payments to production and production-oriented workers, accord with acceptable accounting practice being insufficient, since petitioner's practice of deducting entire payment in year made did not clearly reflect income, considering (1) bonus, based on wages and merit rating, was tied to production, and (2) consistent payment of bonus for 30 years rendered bonus obligatory rather than discretionary distribution of profits and limited board of directors' discretion as to amount. Lincoln Electric Co‒‒‒‒‒‒ Cash Method-Deduction-Additional State Income Taxes-Due But Unpaid.-Petitioner corporation, using cash method of accounting, was not entitled to deduction in 1962-63 for additional State income taxes due as result of decision herein, since petitioner did not show that additional taxes would become due, and even so, any additional taxes would not be paid in either 1962 or 1963. Motel Corp‒‒‒‒ Installment-Cookware Sales-Obligations Used for Loan Collateral as "Dispositions."-Petitioner corporation was entitled to report income from sale of cookware on installment method under sec. 453 in taxable years 1965-66, since, contrary to Commissioner's contention, under Town & Country Food Co. petitioner had not disposed of its installment obligations, which it assigned to bank as collateral for loan, considering facts, which established that transaction was in form and substance loan and not sale of collateral, including, inter alia, bank realized no income from installment obligations but only interest from actual amount owed by petitioner, petitioner handled installment collections and serviced customers, obligation to pay bank was not that of debtors under installment obligations but was that of petitioner and its guarantors, and restrictions imposed on petitioner's operations by its agreement with bank were indicative of loan. United Surgical Steel Co-‒‒‒‒. Installment-Sale of Realty-Change of Election.-Petitioner, who elected to treat disposition of realty as installment sale on untimely filed 1965 return, but who incorrectly included amount of recognized gain to be reported in 1965, was bound by election upon audit by Com 913 926 1433 1215 1781 ACCOUNTING METHODS Continued missioner who found installment method acceptable but computation Installment Method-Change in Law-Retroactive Applicability.— Inventories-Method of Valuation-Prime-Cost vs. Full-Absorption ACCUMULATION OF SURPLUS Avoidance of Tax on Shareholders-Business Purpose.-X was not mere "Mere" Holding Company-Shopping Center Developer-Substantial ADDITIONS TO TAX See also EXEMPT ORGANIZATIONS. Failure to File-Estimated Tax Returns.-Reasonable cause existed for Page 1716 772 1749 986 1566 |