Pacific Grape Products Co., a Corporation v. Commissioner of Internal Revenue

Petitioner is a canner of fruit and fruit products. It regularly billed its customers for all goods ordered by them, but not yet shipped and remaining in petitioner’s warehouse, on December 31 in each year. It accrued upon its books the income from the sales of such un-shipped goods in the taxable years ending on the days of such billing. On the same date it also credited to the accounts of brokers the brokerage due on account of sales of such unshipped goods, and accrued the cost of such unshipped goods including therein the anticipated cost of labeling, packaging and preparing the same for shipment. For many years the petitioner reported its income accordingly. (It filed its returns on the calendar year, accrual basis.)

The Commissioner, in determining deficiencies for the years 1940 to 1944, held petitioner’s method of accounting did not clearly reflect its income and made adjustments by excluding from the computation of income for the years 1939, 1940 and 1941, the sales prices of unshipped goods billed on December 31 of those years, and included such amounts in the computations of income for the years 1940, 1941 and 1942 respectively. He likewise transferred to these later…