Jim Turin & Sons
Analyze the Cash Method Described in this Case
Jim Turin & Sons Inc. (“the taxpayer”) have been using the cash method to report income for the company. The cash method recognizes income once payment has been received. It also includes deducting the cost of asphalt. By not claiming the asphalt as inventory the taxpayer can recognize their income as it comes in instead of when the job is completed. “The Commissioner determined that asphalt was “merchandise,” under Treas. Reg.S. 1.471-1, such that taxpayer had inventories and thus was required to use the accrual method of amounting.” (Jim Turin & Sons Inc.). Since Jim Turin & Sons Inc. don’t report the asphalt as inventory they are able to use the cash method they followed all the guidelines …show more content…
If stored, it will harden, and once hardened, is useless. This case is analogous to cement or concrete providers: Once prepared and placed within a cement truck, there is approximately a 90 minute window in which to deliver and apply the concrete or the concrete properties begin to change and harden, and having changed and begun to harden, the concrete becomes not applicable for the specific job for which it was intended. The taxpayer also argues that because of its unique properties that it would change its physical state after arrival if delivered to any other place than the actual customer job site. “A paving company that lays asphalt immediately upon purchase cannot delay income or accelerate deductions by inventorying its asphalt, because there is no inventory that can be purchased late in one tax year and held over to the next. Thus, given the rationale of S 1.471-1, we agree with the Tax Court that asphalt is not merchandise, and that taxpayer should not have been required to use the accrual method because S 1.471-1 does not apply” (Jim Turin & Sons Inc.). As an overarching issue, Jim Turin & Sons are acting principally as service providers, and not as material or component suppliers. They do not take possession of the asphalt as inventory, which is an overarching and compelling argument to this
Jim Turin & Sons Inc. (“the taxpayer”) have been using the cash method to report income for the company. The cash method recognizes income once payment has been received. It also includes deducting the cost of asphalt. By not claiming the asphalt as inventory the taxpayer can recognize their income as it comes in instead of when the job is completed. “The Commissioner determined that asphalt was “merchandise,” under Treas. Reg.S. 1.471-1, such that taxpayer had inventories and thus was required to use the accrual method of amounting.” (Jim Turin & Sons Inc.). Since Jim Turin & Sons Inc. don’t report the asphalt as inventory they are able to use the cash method they followed all the guidelines …show more content…
If stored, it will harden, and once hardened, is useless. This case is analogous to cement or concrete providers: Once prepared and placed within a cement truck, there is approximately a 90 minute window in which to deliver and apply the concrete or the concrete properties begin to change and harden, and having changed and begun to harden, the concrete becomes not applicable for the specific job for which it was intended. The taxpayer also argues that because of its unique properties that it would change its physical state after arrival if delivered to any other place than the actual customer job site. “A paving company that lays asphalt immediately upon purchase cannot delay income or accelerate deductions by inventorying its asphalt, because there is no inventory that can be purchased late in one tax year and held over to the next. Thus, given the rationale of S 1.471-1, we agree with the Tax Court that asphalt is not merchandise, and that taxpayer should not have been required to use the accrual method because S 1.471-1 does not apply” (Jim Turin & Sons Inc.). As an overarching issue, Jim Turin & Sons are acting principally as service providers, and not as material or component suppliers. They do not take possession of the asphalt as inventory, which is an overarching and compelling argument to this