Hallmark Cards, Inc. v. Commissioner

Hallmark Cards (plaintiff), an accrual-method taxpayer, shipped Valentine's Day merchandise to retailers before year-end to meet holiday timing needs, but revised its sales documents so that title and risk of loss would not transfer to the buyers until January 1 of the following year, since retailers didn't want to treat the goods as received (for inventory purposes) until after the holidays. Hallmark accordingly deferred reporting the related income until the following tax year. The IRS (defendant) assessed a deficiency, arguing Hallmark should have recognized the income in the year of shipment, and Hallmark challenged the assessment.