Case Study: Jim Turin Vs. Commissioner Of Internal Revenue

Turin Vs. Commissioner of Internal Revenue Companies must understand the requirements prior to selecting the accounting method to control their finances, and calculate income and expenses according to its fiscal year. Also, it is important to understand that an accounting method does not really affect the amount of income, but it does affect tax burden. According to Pope, T. R., Rupert, T.J., and Anderson, E. (2016), “…selecting the appropriate method can accelerate deductions or defer income recognition… taxpayers can save taxes by spreading income over several accounting periods” (p. 11-2). Accounting methods include cash receipts, accrual method, and a hybrid method, a combination of cash and accrual method. It is crucial for companies to recognize when they qualify for each method. This paper analyzes the cash method and the accrual method described in Turin Vs. Commissioner of Internal Revenue, explains how Jim Turin & Sons, Inc. asserted its position, and the key points in

Reg.S 1.471-1, which have the taxpayer to recognize the accrual method (Justia US Law, n.d., para. 3). The commissioner also indicated that the cash method did not immediately recognized mismatch of deductions and income due to outstanding accounts receivable at the end of each tax year; however, failing to report outstanding receivables was not sufficient reason to select this method (Justia US Law, n.d., para. 11). Therefore, under this method, Jim Turin & Sons Inc. recognizes income once the service is provided instead of when payment is received; thus, the income would be realized from the sale of merchandise, subtracting the costs of the merchandise to the revenue within the same fiscal