United States Court of Appeals for the Fifth Circuit
230 F.2d 722 (1956)
Schuessler (plaintiff) is an accrual method taxpayer engaged in the business of selling gas furnaces. In 1946, it sold 665 furnaces. With each furnace, Schuessler guaranteed that it would turn the furnace on and off for the purchaser for five years. This service is estimated to cost at least $2.00 per visit. As a result of this guarantee, Schuessler was able to sell its furnaces at $20–25 higher than its competitors. In order to meet this obligation, Schuessler set aside a reserve fund of $13,300 in 1946 and deducted the entire amount on its tax return for 1946. The Tax Court disallowed the deduction.
Rule of Law
Holding and Reasoning (Tuttle, J.)
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