John R. Hansen and Shirley G. Hansen v. Commissioner of Internal Revenue

Taxpayers, husband and wife, have petitioned for review of a memorandum decision of the Tax Court sustaining deficiencies in income taxes for the years 1951, 1952, and 1953 and imposing penalties for failure to file estimated returns and for substantial underestimation of taxes for those years.

John R. Hansen (hereinafter referred to as petitioner) was, in the years in question, engaged in the business of selling new automobiles. It is stipulated that all such sales were financed by the General Motors Acceptance Corporation (GMAC). As a part of the normal course of dealing, and apparently pursuant to a GMAC “Retail Plan” referred to at the trial, GMAC paid Hansen 95% of the sales price of the car at the time of the sale and retained in a dealer reserve account the remaining 5%. GMAC also credited to that account a certain percentage of the financing charges as payments from the purchaser were received. Under this arrangement no portion of the 5% reserve account was payable to Hansen except at the complete discretion of GMAC; and release of any funds was contingent on there being in the reserve account an amount in excess of 5% of all outstanding contracts. Petitioner, an accrual…