Leon Nightingale v. United States

This is an appeal from a judgment for the United States in an income tax refund case. We affirm.

I. The Facts.

The parties stipulated to the facts and the district court embodied the stipulated facts in its findings of fact. The taxpayers are shareholders or representatives of shareholders in Sierra Development Company, a Nevada corporation, which operates a gambling casino in Nevada under the name of Club Cal-Neva. The corporation and its shareholders have elected to be taxed under Subchapter S of the Internal Revenue Code.

The tax year in question is the fiscal year ending June 30,1973. The claim for refund is for $54,460.00, which is the total “liability” of the casino as of the close of the taxable year for progressive jackpots which had not yet been won by any player. The claim is that the amount shown on the slot machine as the payout if a player hits the progressive jackpot is an accrued liability, and hence deductible, the casino’s accounting being on the accrual basis.

The stipulation of facts is detailed. We state only so much of it as is necessary to an understanding of the parties’ arguments.

During its fiscal year ending June 30, 1973, Sierra Development Company…