Thursday, December 5, 2013

Commissioner v. Boylston Market Ass’n case brief

Commissioner v. Boylston Market Ass’n case brief summary
131 F.2d 966 (1942)


CASE SYNOPSIS
Commissioner of Internal Revenue filed petition for review of decision of United States Board of Tax Appeals granting under Sections 23 and 42 of the Revenue Act of 1936, 49 Stat. 1648, taxpayer's deduction of the prepaid pro rata portion of insurance applicable to each year.

CASE FACTS
Taxpayer, who kept his books and filed his returns on a cash basis, deducted each year as insurance expenses the amount of insurance premiums applicable to carrying insurance for that year regardless of the year in which the premium was actually paid. The Commissioner filed notice of deficiency based on deductions in the amounts of premiums actually paid in those years, on the grounds that deductions for insurance expenses of a taxpayer on the cash receipts and disbursements basis was limited to premiums paid during the taxable year.

DISCUSSION

  • The court found that the reasoning of Welch v. DeBlois, 94 F.2d 842 (1st Cir. 1938) no longer applied as no real basis for distinguishing between prepaid insurance and other prepayments that were entitled to be deducted on pro rata basis existed. 
  • Moreover, to permit the taxpayer to take a full deduction in the year of payment distorted income.

CONCLUSION
The court affirmed the decision as no real basis was found to distinguish between tax treatment of prepaid insurance premiums and prepayment of rentals, bonuses, or commissions.


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