Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 71-3

1971-1 C.B. 60

Sec. 164

Sec. 461

IRS Headnote

Real property and tangible personal property taxes in Missouri accrue on January 1 of each year; I.T. 4101 superseded.

Full Text

Rev. Rul. 71-3 /1/

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, the position set forth in I.T. 4101, C.B. 1952-2, 118.

The question presented is whether real property taxes and tangible personal property taxes imposed by the laws of the State of Missouri accrue, for Federal income tax purposes, on January 1 of each year under the circumstances described below.

The taxpayer, a domestic corporation, computes its income under the accrual method of accounting and reports its income on a calendar year basis for Federal income tax purposes. During the current taxable year it owned both real and personal property located in the State of Missouri.

Section 137.075 of the Annotated Missouri Statutes, as amended, provides that every person owning or holding real property or tangible personal property on the 1st day of January including all such property purchased on that day, shall be liable for taxes thereon during the same calendar year.

Section 137.080 of the statutes, as amended, provides that real estate and tangible personal property shall be assessed annually at the assessment which commences on the 1st day of January. Section 137.085(2) of the statutes, as amended, is as follows:

2. Real property shall in all cases be liable for the taxes thereon, and a lien is hereby vested in favor of the state on all real property for all taxes thereon, which lien shall accrue and become a fixed encumbrance as soon as the amount of the taxes is determined by assessment and levy, and said lien shall be enforced as provided by law; said lien shall continue to be enforced until all taxes, forfeitures, back taxes and costs shall be fully paid or the land sold or released as provided by law.

Section 137-115, of the statutes, as amended, provides:

1. After receiving the necessary forms the assessor or his deputies shall, except in the city of St. Louis, between the first day of January and the first day of June, annually make a list of all real and tangible personal property taxable in his county, town or district, and except as otherwise provided in subsection 2 hereof, shall assess the property at its true value in money * * *

Section 1.461-1(a)(2) of the Income Tax Regulations provides that, under an accrual method of accounting, an expense is deductible for the taxable year in which all the events have occurred which determine the fact of the liability and the amount thereof can be determined with reasonable accuracy.

In United States v. Certain Land Situate in City of St. Louis, Mo., et al, 86 Fed. Supp. 297 (1946), the court, in determining when the lien for State, school, and city taxes commenced for taxes due and payable in 1946, held that the State had at least an inchoate lien from January 1, 1946, for taxes due on the land in 1946, which became fixed in amount by relation back to that date after the assessment and levy were completed.

In Albert P. Long et al. v. City of Independence, 360 Mo. 620, 229 S.W. 2d 686 (1950), the Supreme Court of Missouri, in holding that the effective date of assessment is January 1, stated:

* * * The General Assembly has enacted many laws outlining the entire taxing process, and prescribing the powers and duties of various officials and boards of the state, county, city and other subdivisions, relative to the assessment, levy and collection of taxes. Chap. 79, Mo. R.S.A. The result of this process, which commences January 1 and is not completed until months later, is the "official assessment" as to each individual person or property unit.

* * * While this official assessment is not made on January 1, it is as of that date so far as assessment of state and county taxes is concerned. * * * This is also true as to city taxes upon property within the city on January 1. * * *

Accordingly, in the instant case, real property and tangible personal property taxes levied by the State of Missouri accrue, for Federal income tax purposes, on January 1 (lien date) of each year.

I.T. 4101 is hereby superseded, since the position stated therein is restated under the current law in this Revenue Ruling.

/1/ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.