*1924 ACCOUNTING - INSTALLMENT BASIS. - Petitioner, an individual doing a regular installment sale business, made his return voluntarily for the year 1924 on the accrual basis. Held that upon the subsequent enactment of the Revenue Act of 1926 petitioner is entitled under the retroactive provisions of section 212(d) to recompute his income for that year upon the installment basis.
*94 This appeal is from a deficiency of $1,385.71 determined for the calendar year 1924, and arising from a denial by respondent of deductions of $11,700 claimed on the return as bad debts. Petitioner does not contest the denial of this deduction, but assigns error upon the refusal of respondent to permit, under sections 212(d) and 208 of the Revenue Act of 1926, the computation of income for 1924 upon the installment basis.
FINDINGS OF FACT.
Petitioner is an individual residing at Minneapolis, Minn., and for several years prior to 1924 operated as sole proprietorships two businesses for the sale of victrolas, talking machines, and accessories, one of these a wholesale*1925 business, and the other a retail store, the business of which was largely conducted on the installment basis. The retail busines referred to was discontinued during the latter part of 1924.
Later in the year 1924 petitioner advised respondent of the closing of his retail store and asked permission to make his return for that year on the accrual basis instead of the installment basis, upon which returns had formerly been made, and this request was granted, petitioner making his return upon the accrual basis and including in income an item of $26,940.26, representing deferred profits on installment sales unrealized as at December 31, 1924.
At December 31, 1924, there remained unpaid installment contracts in the total amount of $27,656.55, on which the unrealized profits amounted to $10,741.49. This amount of $27,656.55 consisted of installment accounts receivable originating in the six preceding years as follows:
| Year of sale | Amount of | Rate of gross | Unrealized |
| sales | profit | profit | |
| Per cent | |||
| 1919 | $113.15 | 47.9 | $54.20 |
| 1920 | 1,052.10 | 47.41 | 498.80 |
| 1921 | 1,632.25 | 44.52 | 726.68 |
| 1922 | 5,886.75 | 39.41 | 2,319.97 |
| 1923 | 8,706.69 | 41.35 | 3,600.22 |
| 1924 | 10,265.61 | 34.5 | 3,541.62 |
| Total | 27,656.55 | 10,741.49 |
*1926 The total amount of installment accounts receivable as at December 31, 1923, was $65,405.38, on which there were unrealized profits of $26,940.26, computed as follows:
| Year of sale | Amount of | Rate of gross | Unrealized |
| accounts | profit | profit | |
| Per cent | |||
| 1919 | $458.40 | 47.9 | $219.57 |
| 1920 | 1,799.84 | 47.41 | 853.36 |
| 1921 | 4,817.25 | 44.52 | 2,144.64 |
| 1922 | 20,416.14 | 39.41 | 8,057.82 |
| 1923 | 37,888.75 | 41.35 | 15,664.93 |
| Total | 65,405.38 | 26,940.26 |
*95 The retail sales for 1924 were $51,731.38, on which there was a gross profit of $17,882.38.
OPINION.
TRUSSELL: The Revenue Act of 1926 provides as follows:
SEC. 212. (d) Under regulations prescribed by the Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the total profit realized or to be realized when the payment is completed, bears to the total contract price. * * *
SEC. 1208. The provisions of subdivision (d) of section 212 shall be retroactively applied*1927 in computing income under the provisions of the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, the Revenue Act of 1921, or the Revenue Act of 1924, or any of such Acts as amended. * * *
Petitioner contends that, it being shown that he regularly sold goods on the installment plan in 1924, he is entitled to now return the income for that year on the installment basis under the above-quoted provisions of the Revenue Act of 1926, irrespective of the fact that his retufn rot aht year was made on the accrual basis. Respondent insists that petitioner, having returned his income on the installment basis for several years prior to 1924 and having changed to the accrual basis in that year at his own request, is now estopped to take advantage of the privilege accorded by the above quoted provision of the act subsequently passed.
We can not agree with respondent's theory. The most that can be said is that petitioner, after changing from the installment to the accrual basis in 1924, was thereupon to be considered as on such basis and entitled to any privilege accorded by existing law or subsequently extended by any later act to one selling on the installment plan*1928 in that year and reporting such sales on the accrual basis. It is not denied that petitioner regularly sold his goods during 1924 on the installment plan and he thereby fulfills the conditions prescribed by section 212(d) and is entitled to its benefits. The appeal *96 of , cited by respondent as authority for his contention that one who keeps his books of account on the accrual basis can not make his return on the installment basis, has no application to this case, a that proceeding was one prior to the enactment of the Revenue Act of 1926, in which the privilege here relied upon was granted. We hold that he is entitled to return this income on the installment basis.
Judgment will be entered under Rule 50.