The opinion
Black, J., dissenting: I dissent from the majority opinion on the first point covered in the second headnote. This point is stated in the majority opinion as follows:
* * * (1) Is the petitioner entitled to additional deductions in tLe amounts of $10,854 and $4,409.26, representing accrued vacation payments claimed by petitioner in its 1943 and 1945 returns, respectively? * * *
I think petitioner is entitled to such additional deductions under the facts as they are found by the majority. These facts need not be repeated here as they are covered by the findings of fact designated “Facts Relating to Vacation Pay Issue.” The majority opinion holds that the petitioner is not entitled to such additional deductions.
Petitioner used an accrual system of accounting and it goes without saying that it is entitled to file its income tax returns on that basis. It seems to me that what the Commissioner has done with reference to these vacation pay accruals is to place petitioner on a cash basis as to them and I fail to see the justification for it. In my judgment, to do so is contrary in principle to what we held in Atlantic Coast Line Railroad Co., 4 T. C. 140 . The-system of accruals by the taxpayer there as to the item in dispute was very similar to the one here used by petitioner. In that case petitioner consistently accrued monthly throughout the last half of one taxable year and the first half of the next year to reflect estimated liability for Federal capital stock tax. On these facts we held that such accruals were permissible and not an improper distortion of petitioner’s income, notwithstanding that the statutory liability accrues each year on July 1 for a fiscal year covering the ensuing 12 months at the end of which a return is made and tax computed and paid.
In the instant case as a result of the Government’s action in directing vacation payments of $50 to petitioner’s employees, the petitioner, in June 1943. paid its miners $25,040 and thereafter began to accrue on its books $2,000 a month in order to meet the vacation payments which, under the directive, it was required to make in 1944. On April 11, 1945, the vacation pay provisions were again amended to provide for vacation payments to the miners at the rate of $75 instead of $50 and petitioner again increased its monthly accruals accordingly. It is difficult for me to see why the doctrine of the Atlantic Coast Line Railroad Co. case, supra, is not applicable to these facts. In the Atlantic Coast Line case, in sustaining the taxpayer in its method of accruing its capital stock tax liability, we said, among other things:
The dominant characteristic of this situation is that petitioner has consistently followed the method of accounting it now seeks to have approved. Unlike such cases as Budd International Corporation, supra, where the taxpayer’s inconsistent treatment was emphasized, our sole present concern is whether this petitioner’s regularly employed system of keeping its records was such as to reflect its income properly. If so, no compelling reason for condemning it has been advanced. Sec. 43, I. R. C.
It seems to me that it can just as appropriately be said here as was said in the Atlantic Coast Line case that “our sole present concern is whether this petitioner’s regularly employed system of keeping its records was such as to report its income properly. If so, no compelling reason for condemning it has been advanced.” It seems to me that the method which petitioner consistently used in accruing its liability for vacation pay did not distort income, but, on the contrary, aided in clearly reflecting it. Therefore, I see no reason why it should be disapproved.
Under the facts and following Atlantic Coast Line Railroad Co., supra, I would sustain petitioner’s assignment of error that the Commissioner erred in disallowing $10,854 and $4,409.26, representing accrued vacation payments claimed by petitioner in its 1943 and 1945 returns, respectively.
Van Fossan, •/., agrees with this dissent.