205 F.2d 919 | 10th Cir. | 1953
Lead Opinion
This case involves disputed income taxes for the year 1943. The taxes were paid and an action was instituted to recover them. The Government has appealed from an adverse judgment.
There is no dispute in the facts. So far as material, it may be stated that the Harmon Construction Company entered into contracts with the Federal Public Housing Authority for the construction of three housing projects.
The construction work on all three projects was completed in the latter part of 1943 and on November 12, 1943, a certificate of completion was executed by the Harmon Construction Company, showing however outstanding and unpaid claims totalling $18,095.30. On about November 5, 1943, the project engineer executed a certificate of completion on projects Ark-3048 and 3049. The regional construction adviser, the regional attorney, the regional labor relations adviser and the assistant director of Region VIII executed the certificate on January 4, 1944. The project engineer executed the certificate of completion on project Ark-3-175 November 7, 1943, and the other enumerated officers executed the certificate on January 4, 1944. During the course of the construction work, the Government verbally approved certain wage increases to be paid by subcontractors. These increases were reflected in the list of unpaid bills at the time the certificate of completion was executed by the contractor. On December 30, 1943, a change order authorizing the increased wages was sent to Harmon Construction Company and on December 31 the company paid the subcontractors. On January 11, 1944, Harmon sent to the regional accountant claims for reimbursement for these amounts paid to the subcontractors and in February, 1944, the payment of such claims to the subcontractors was authorized. These claims were paid by the Government on February 13 and February 23, 1944. Sometime in 1944 final audits were made and the amount due Harmon was determined. As a result of this audit, the Government disallowed $276.78 for overcharges on the use of equipment and disallowed as non-reimbursable an item of $929.91. These amounts were deducted from the balance due Harmon on his retained fixed fee and on May 16, 1944, the remaining balance of the fixed fee was paid. It is this income which is in question in this litigation. The question is whether it should have been returned in Harmon’s 1943 return or whether it was properly returned by him in his 1944 return.
Harmon kept his books and made his tax returns on an accrual basis. It is a well settled principle of law that where a taxpayer keeps his books and files his returns on the accrual basis, income is to be accounted for in the yeár in which it is realized, irrespective of when it is ultimately received. It is the right to receive and not the actual receipt of income that determines when income must be included in gross income for income tax purposes. When the right to receive income becomes fixed and absolute, the duty of' one on the accrual basis to report it arises.
Affirmed.
. While these contracts were made with the Harmon Construction Company, a co-partnership, it is conceded the tax liability is that of appellee, D. Allan Har
. Brown v. Helvering, 291 U.S. 193, 54 S.Ct. 356, 78 L.Ed. 725; Spring City Foundry Co. v. Commissioner, 292 U.S. 182, 54 S.Ct. 644, 78 L.Ed. 1200; Commissioner of Internal Revenue v. Security Flour Mills Co., 10 Cir., 135 F.2d 185, affirmed, 321 U.S. 281, 64 S.Ct. 596, 88 L.Ed. 725; Clark v. Woodward Construction Co., 10 Cir., 179 F.2d 176.
. Lucas v. North Texas Lumber Co., 281 U.S. 11, 50 S.Ct. 184, 74 L.Ed. 668; Commissioner of Internal Revenue v. R. J. Darnell, Inc., 6 Cir., 60 F.2d 82; Commissioner of Internal Revenue v. Cleveland Trinidad Paving Co., 6 Cir., 62 F.2d 85.
Concurrence Opinion
(concurring).
It is my opinion that the acceptance of the work, not only by the project engineer, hut by the regional construction adviser, the regional attorney, the regional labor relations adviser and the assistant director of Region VIII was a condition precedent, and had to be obtained to render the obligation to pay the balance of the fixed fee fixed and absolute. See 9 Am.Jur., Building and Construction Contracts, § 34, p. 24. For that reason, in addition to the reasons stated by Judge Huxman, it is my opinion that the judgment should be affirmed.