South Coast Co. v. Franchise Tax Board

South Coast Company (hereinafter called South Coast) seeks to obtain a refund of 1953 income taxes which it contends were paid erroneously under the Bank and Corporation Tax Law of the State of California. South Coast appeals a judgment in favor of the Franchise Tax Board of the State of California after the denial of its claim for refund was confirmed by the State Board of Equalization.

The findings of fact, which are not in dispute, disclose that South Coast operated a shipyard for the construction, alteration and repair of seagoing vessels. It was the business custom and practice of South Coast, which submitted tax returns on the accrual system, to report its income on contracts to be performed over a period of more than one year upon a percentage of completion basis.

South Coast on December 18, 1951, entered into a contract with the United States Government under which it engaged to construct six motor minesweepers to be delivered one each month commencing with July 1, 1953, the final delivery to be made on December 1, 1953. South Coast was delayed in completing performance under the subject contract and although the work was 88.61 percent completed by the end of 1953, the…