ARTNELL CO. V. COMMISSIONER
400 F.2d 981 (2nd Cir. 1968)
NATURE OF THE CASE: This was a dispute over the tax status of advance ticket sales for a
baseball team. Artnell (P) appealed a judgment of the Tax Court that upheld the
determination that P had a tax deficiency caused by P's improper treatment of proceeds of
advance sales of tickets for baseball games and revenues for related future services as
deferred income.
FACTS: The White Sox baseball team sold season tickets and single admissions for later
games in advance early in the 1962 baseball season. It also received revenues for
broadcasting and televising future games and it sold season parking books. Its method of
accounting was accrual and its taxable year would have normally run to October 31, 1962.
Before May 1962, Artnell Company (P) had acquired all the stock in the White Sox and it was
liquidated. P became the owner of all the assets and then continued to operate the team. As
of the date of acquisition, the balance sheet showed a deferred income that in part had not
yet been allocated to games to be played after May 31. As the games were played, P took into
income the amounts of deferred unearned income allocated to each. The income tax return that
was filed by Artnell as transferee in May 31, 1962 did not include the deferred unearned
income as gross income. The IRS decided that it must be included. The tax court affirmed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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