Westpac Pacific Food (Westpac) (plaintiff) was a purchasing syndicate comprised of three grocery-store chains. Westpac entered into discounted volume-purchase contracts with grocery suppliers. The suppliers advanced approximately $5 million annually to Westpac as a discount on Westpac’s future purchases. Whenever Westpac purchased the agreed-upon volume of inventory at full price, Westpac would keep the cash advance as a discount for the volume purchase. Whenever Westpac purchased less than the agreed-upon volume, Westpac would repay the cash-advance amount, prorated to reflect the actual volume that Westpac purchased. Westpac was an accrual-basis taxpayer. When Westpac received the cash advances, Westpac accrued the advances as a liability, as was generally accepted. Westpac offset this liability pro rata whenever Westpac purchased inventory to which the discount applied. The federal tax commissioner (defendant) sought to tax Westpac on the cash advances in the tax years the advances were received, asserting that the advances were taxable income. Westpac petitioned the United States Tax Court for a redetermination. The tax court entered judgment in favor of the commissioner. Westpac appealed to the United States Court of Appeals for the Ninth Circuit.