SCHUESSLER V. COMMISSIONER
230 F.2d 722 (5th Cir. 1956)
NATURE OF THE CASE: This was a dispute over a deduction for the estimated costs of
guarantees given with products sold. Schuessler (P) sought review of a decision by the Tax
Court, which disallowed a deduction representing a reserve set up by Ps while keeping their
books on the accrual basis, to represent their estimated cost of carrying out a guarantee,
given with each of the furnaces sold by them during the year, to turn the furnace on and off
each year for five years.
FACTS: P was in the gas furnace business. In 1946, he sold 665 furnaces each with a
guarantee that he would turn the furnace on and off each year for five years. P amply
established that such a service would cost $2 per call. P was an accrual basis taxpayer and
he took a charge of $13,300 to cover the cost of this guaranteed service. The furnaces were
sold at a price that was $20-25 more than competitors because of this guarantee that
competitors did not offer.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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