Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 68-35

1968-1 C.B. 190

Sec. 446

Full Text

Rev. Rul. 68-35

The taxpayer, a corporation, is engaged in the banking and related businesses. No inventories are involved in the conduct of its business. The books of the corporation have been maintained on the cash receipts and disbursements method of accounting and its Federal income tax returns have been consistently filed in accordance therewith. However, during the year in question, the corporation kept its books, for quarterly statement purposes only, on the accrual method of accounting. This was done for management purposes. At the end of the taxable year, the corporation made accounting adjustments to convert its permanent books and records to the cash receipts and disbursements method of accounting so that the Federal income tax returns filed in accordance with such method would be consistent with the returns filed for prior years.

Held , the taxpayer may continue to use the cash receipts and disbursements method of accounting for Federal income tax purposes if the taxpayer's consistently used cash method of reporting income for Federal income tax purposes clearly reflects income, and if the adjustments required to convert may be readily verified from the taxpayer's permanent books and records.