Crescent Wharf & Warehouse Company v. Commissioner of Internal Revenue

In this appeal a taxpayer presents the question of whether it can accrue its liability for workmen’s compensation payments for income tax purposes under the circumstances herein stated. The Tax Court held that it could not in an opinion reported at 59 T.C. 751 (1973). The taxpayer appeals.

Appellant Crescent Wharf and Warehouse Company (Crescent) is engaged in the business of providing stevedoring, terminal and warehousing services to ocean-going vessels at the Ports of Los Angeles, Long Beach and San Diego. In 1964 it became a self-insurer of its liabilities for state and federal workmen’s compensation claims up to $25,000 per occurrence and carried a policy of insurance with a commerciál insurer for its excess. It computed its income and kept its books of account on the accrual method with its taxable year as the calendar year. It contends on this appeal that it was entitled to a deduction of an accrual of $266,581 at December 31, 1966, for its workmen’s compensation liability on uncontested claims. The Tax Court held that it was not.

The administration of appellant’s self-insurance workmen’s compensation program is handled by R. L. Kautz and Company (Kautz), which…