Spring City Foundry Co. v. Commissioner

CitationSpring City Foundry Co. v. Commissioner, 292 U.S. 182, 54 S. Ct. 644, 78 L. Ed. 1200, 1934 U.S. LEXIS 705, 4 U.S. Tax Cas. (CCH) P1276, 13 A.F.T.R. (P-H) 1164, 1934-1 C.B. 281, 1934 P.H. P1150 (U.S. Apr. 30, 1934)

Brief Fact Summary. Petitioner sold goods to a customer on an open account annually. Before the end of the year, the customer went bankrupt and Petitioner was not paid the full amount owed.

Synopsis of Rule of Law. In manufacturing, merchandising, or mining, gross income means the total sales, less the cost of goods sold, plus any income from investments and from incidental or outside operations or sources.

Issue. Is the full amount of the sales includible in gross income even though Petitioner has not actually received payment?

Held. Chief Justice Hughes delivered the opinion for the Supreme Court of the United States in holding against Petitioners and finding that the right to receive the fixed amount is includible in gross income.

Discussion. It is the right to receive and not the actual receipt that determines inclusion in gross income. When the right to receive is a fixed amount, then the right accrues and is includible in gross income.