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UNITED STATES V. ANDERSON, 269 U. S. 422 (1926)

U.S. Supreme Court

United States v. Anderson, 269 U.S. 422 (1926)

United States v. Anderson

Nos. 337, 420

Argued November 20, 1925

Decided January 4, 1926

269 U.S. 422


1. The Revenue Act of 1916 imposed a tax on net income and profits ascertained by deducting from gross income expenses paid, losses sustained, interest and taxes paid during the calendar year, but provided, § 13(d), that

"a corporation . . . keeping accounts upon any basis other than that of actual receipts and disbursements, unless such other basis does not clearly reflect its income, may, subject to regulations of the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, make its return upon the basis upon which its accounts are kept, in which case the tax shall be computed upon its income as returned."

Held, that where the taxpayer's books, reflecting its income, were kept upon an "accrual" basis -- i.e., by charging against income earned during the taxable period (1916) the expenses incurred in and attributable to the process of earning income during that period -- and made its return upon that basis and not the basis of actual receipts and disbursements, it was permitted under the statute, as correctly construed by a Treasury regulation, to include in its deductions the amount of a "reserve" entered on its books for taxes imposed by the United States on the profits of munitions made and sold by the taxpayer during that year, although the tax had not "accrued" in the sense of having been assessed and become due, and that it was not permissible, as the taxpayer attempted, to defer deduction of the tax until the income return for the following year, during which the tax became due and was paid. Pp. 269 U. S. 438, 269 U. S. 441.

Page 269 U. S. 423

2. Findings considered and held to show that the books of a taxpayer were kept on the basis of accruals and reserves to meet liabilities incurred. P. 269 U. S. 442.

3. In a suit to recover a tax erroneously exacted, the burden is on the plaintiff to prove the facts establishing invalidity of the tax. P. 269 U. S. 443.

60 Ct.Cls. 100, id., 440, reversed.

Appeals from judgments of the Court of Claims in two suits brought by the Trustees in dissolution of the Burton-Richards Company, a corporation, and by the Yale & Towne Manufacturing Company to recover income taxes alleged to have been erroneously exacted under the Revenue Act of 1916.

Page 269 U. S. 434

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