American Automobile Association v. United States

367 U.S. 687 (1961)

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Nature of the Case

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Facts

Taxes for the calendar years were prepared on the basis of the same accrual method of accounting as AAA (P) used for keeping its books. P reported gross income as only that portion of the total prepaid membership dues actually received and collected in the calendar year which ratably corresponded with the number of membership months covered by the dues and occurring in the same taxable year. The Commissioner contends that P should not have apportioned the dues and reported the entire amount when it was received without regard to any expected future service expense in the subsequent years. It has been conceded that P’s methods of accounting are in accord with generally accepted commercial accounting principles. The Court of Claims found that the method of treatment of prepaid membership dues was purely artificial and accepted the Michigan case as a rejection by the Supreme Court for accounting methods advanced by the plaintiff in that case.