The U.S. Tax Court today denied the IRS’s motion for summary judgment in a case concerning the taxpayer’s income tax liability for 2008. The Tax Court found “there exist genuine disputes of material fact” as to whether the taxpayer had adopted the deposit method of accounting with respect to one customer payment.
The case is: Thrasys, Inc. v. Commissioner, T.C. Memo 2018-199 (December 4, 2018). Read the opinion [PDF 90 KB]
The taxpayer was in the business of developing and creating custom software. During 2008, the taxpayer received but did not report a $15 million payment from one customer. The taxpayer claimed that this payment was an advance payment, and that tax on this amount was properly deferred to 2009 under the “deferral method” of accounting permitted by Rev. Proc. 2004-34.
The IRS countered that the taxpayer could not use the deferral method of accounting because adopting that method would have been an impermissible change in its method of accounting, absent consent of the IRS Commissioner before changing the accounting method.
The Tax Court, in denying the IRS’s motion for summary judgment, noted the following:
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