Business Services Industry
Tax Court addresses claim of offset against deferred payments.
Tax Adviser, The, June, 2009 by Hanway, Kurt R.
In a Tax Court case published on January 28, 2009, Trinity Industries, Inc., 132 T.C. No. 2, the court required the taxpayer to accrue in income, in the year it is earned, the total contract price for the sale of barges--including amounts withheld by customers against deferred payments because of a commercial contract dispute. The taxpayer (Trinity) treated the withheld amounts as nonaccruable. In addition, the Tax Court denied Trinity's deduction of the withheld amount as a Sec. 461(f) contested liability because Trinity failed to transfer money for the satisfaction of the liability.
Facts
Trinity, an accrual-method taxpayer, entered into a series of contracts with two customers in the late 1990s to provide barges. Trinity generally recognized...
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