Sohio Corp. v. Commissioner

Opper, /., dissenting: It is merely confusing to consider the present proceeding as though petitioner might have been in receipt of income. All that is involved is a matter of deductions and the sole question is whether petitioner’s accounts properly reflected its true income. Respondent concedes that petitioner was entitled to accrue and deduct for the expenses actually incurred in collecting and transmitting the withheld tax to the state. All that could be involved, in addition, is to determine whether petitioner is likewise entitled to deduct 100 per cent of the contract price of the oil it purchased, or only 97 per cent, since that is the amount it acknowledged as owing to its vendors.

Unfortunately, the meager stipulation upon which the case was presented does not supply the fundamental information upon which it is possible to determine whether that issue is present. It seems to me that the case should consequently be set down for a further hearing to permit the parties to introduce proof as to the specific bookkeeping entries which petitioner actually made.

If upon that supplemental record it appears that petitioner deducted the full amount which it had contracted to pay to its vendors, the correct result would be, it seems to me, to deny so much of that deduction as constitutes a nonaccruable item in the years before us. Petitioner retained the 2 per cent of the 3 per cent and, notwithstanding its claim of unconstitutionality, apparently proposed to continue to retain it until the question had been set at rest. It did not acknowledge its debt to its vendors unconditionally, and at least as of the end of the tax years in issue it was under no legal liability to make payment. Hence it was prevented from entering a proper accrual at that time. Security Flour Mills v. Commissioner, 321 U. S. 281 .

If, on the other hand, all that it accrued as a liability to its vendors was 97 per cent of the purchase price, the other 3 per cent being accrued in part (98 per cent) as a liability to the state, and the balance (2 per cent) as expenses actually incurred, then its accounting for the transaction was unmistakably correct for the years in issue, and the deficiency would be improper. I see no way, however, to approach a solution of this apparently confusing controversy without knowledge of that indispensable fact.

I accordingly dissent from the present disposition of the question, even though it might eventuate that the conclusion reached is correct.