General Dynamics Corporation (General Dynamics) (plaintiff), an accrual-basis taxpayer, was legally obligated to pay for medical services received by its employees and their dependents. However, many employees did not file a claim to obtain reimbursement until after the end of the tax year. In 1972, General Dynamics estimated the amount of payments that would eventually be made for medical services received by its employees in the current tax year. General Dynamics then established a reserve fund large enough to cover the estimated payments, and deducted this amount from its gross income for the tax year. The commissioner of internal revenue (commissioner) disallowed General Dynamics’ tax deduction. General Dynamics petitioned the federal claims court for a tax refund from the United States government (defendant). The claims court granted the refund petition because General Dynamics had incurred liability for the payment of medical services in the current tax year. The United States Court of Appeals for the Federal Circuit affirmed, and the United States Supreme Court granted certiorari.