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Artnell Co. v. Commissioner

Citation. Artnell Co. v. Comm’r, 400 F.2d 981, 68-2 U.S. Tax Cas. (CCH) P9593, 22 A.F.T.R.2d (RIA) 5590 (7th Cir. Sept. 19, 1968)
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Brief Fact Summary.

The owner of the Chicago White Sox baseball team sought to defer income for prepaid services, such as game tickets, until the actual event and not before. The tax court found that deferral was not an option and the White Sox appealed.

Synopsis of Rule of Law.

Prepaid items do not necessarily accrue for tax purposes in the year of receipt.


Artnell Company became the owner of the Chicago White Sox baseball team on May 31, 1962. As of that date, the balance sheet for the White Sox showed as deferred unearned income part of the amount received for season tickets, advance single admissions, radio, television, and season parking books for games to be played after May 31. The White Sox tax return for 1962 did not include the deferred unearned income as gross income and the commissioner found that it should have been included.


May prepayments for tickets for baseball games be treated as income when the games are played?


Circuit Judge Fairchild issued the opinion for the United States Seventh Circuit Court of Appeals in reversing the tax court, and holding that the tax court was in error in holding that the prepayments were income when received.


The Court of Appeals found that the deferred income could be attributed to a fixed game schedule. In reversing and remanding, the Court of Appeals found that the tax court should determine if the White Sox did accurately reflect its income in the subsequent taxable year.

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