American Automobile Association v. United States
United States Supreme Court
367 U.S. 687 (1961)
Relevant factsFree
AAA (plaintiff) collected annual prepaid membership dues but, using accrual accounting, reported only a pro-rata portion of each member's dues as income in the year received, deferring the rest to offset anticipated future service costs; the Commissioner taxed the dues as fully earned in the year received, following a prior Supreme Court decision rejecting a similar automobile club's accrual method as artificial.
IssueFree
Whether, under federal tax law, an accrual-basis taxpayer must recognize prepaid membership dues as fully earned income when received.