INTRODUCTION TO TAX SCHOOL
Top 100 Cases
Boise Cascade v. U.S., 208 Ct. Cl. 619
© Steven J. Willis 2006
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Boise Cascade v. U.S., 208 Ct. Cl. 619
• Boise Cascade is famous for these important
propositions:
• Accrual method taxpayers may sometimes defer
recognition of pre-paid service income until the year of
performance.
• This case is a narrow exception to the Schlude trilogy of
cases requiring accrual method taxpayers recognize
income before accounting recognition of income
© Steven J. Willis 2006
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Boise Cascade v. U.S., 208 Ct. Cl. 619
• The famous language of the Doctrine.
It is our best judgment that, although the policy of deferring,
where possible, to congressional procedures in the tax field
will cause the Supreme Court to accord the widest possible
latitude to the commissioner's discretion, there must be
situations where the deferral technique will so clearly reflect
income that the Court will find an abuse of discretion if the
commissioner rejects it.
© Steven J. Willis 2006
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Boise Cascade v. U.S., 208 Ct. Cl. 619
• FACTS: The accrual method taxpayer provided
engineering and other services on a contract basis to its
customers. They would bill the customers on a regular
interval for the services (monthly, quarterly). In some cases
the payments were due prior to the annual period in which
such services are to be performed.
• ISSUE: May a taxpayer defer income received that is
unearned?
• HOLDING: Amounts accrued in Boise Cascade’s
"Unearned Income" account are not taxable until the year
in which they perform the services which earn that income.
© Steven J. Willis 2006
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Boise Cascade v. U.S., 208 Ct. Cl. 619
• To summarize:
– When you hear of “Boise Cascade,” you should think of:
– A narrow exception to the Schlude rule requiring accrual method
taxpayers to include amounts pre-paid for services. The
Claim
of Right Doctrine
– You should also associate the case with transactional accounting
and the notion that every year stands alone.
• Ideally, you would also associate the case with
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis 2006
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