In 1973, Martin and Vincent Zaninovich (plaintiffs) entered into a 20-year lease agreement for their farming business. The lease term ran from December 1 to November 30, with yearly rent due by December 20 of each year. The Zaninoviches used the cash-basis method of accounting, meaning that all of their expenses and gains were recognized at the time of actual payment or receipt for tax purposes. The Zaninoviches deducted the entire first year’s rental payment in their 1973 federal taxes. The commissioner of internal revenue (commissioner) (defendant) determined that the lease-payment deduction had to be prorated and that the Zaninoviches could only deduct the portion of rent allocable to December 1973. The Zaninoviches petitioned the tax court for a redetermination. The tax court sustained the commissioner’s decision. The Zaninoviches appealed to the United States Court of Appeals for the Ninth Circuit.