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Georgia School-Book Depository v. Commissioner

United States Tax Court
1 T.C. 463 (1943)


The Georgia School-Book Depository (Depository) (plaintiff) was a broker that earned commissions by purchasing textbooks on behalf of the State of Georgia (Georgia) for public schools, as well as a few independent colleges. Depository paid its taxes on the accrual accounting basis. Depository accrued its commissions from the colleges at the time the textbooks were purchased. However, Depository did not accrue its commissions from Georgia until the commissions were paid, taking the position that those commissions were not earned until paid. The federal tax commissioner (defendant) sought to tax Depository on the commissions earned from Georgia in the tax year that the textbooks were purchased. Depository asserted that because there was no reasonable expectation that Georgia would pay the commissions, Depository appropriately deferred accruing commissions from Georgia until Depository received payment. Depository noted that Georgia recently had enacted legislation to provide free textbooks for public schools without allocating adequate public funding. Depository petitioned the United States Tax Court for a redetermination, arguing that Depository was entitled to accrue commissions from Georgia at the time the commissions were received.

Rule of Law


Holding and Reasoning (Kern, J.)

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