Lucas v. North Texas Lumber

North Texas Lumber (NTL) (plaintiff) offered Southern Pine Company a 10-day option to buy NTL's assets on December 27, 1916, which Southern Pine accepted on December 30, 1916, creating an executory contract, but the transaction did not actually close until January 5, 1917, when NTL delivered the necessary documents; NTL, using accrual accounting, reported the sale proceeds on its 1916 tax return, but the IRS (defendant) determined the income was taxable in 1917 instead, resulting in significantly higher tax liability for NTL. The Board of Tax Appeals affirmed the IRS, the court of appeals reversed, and the Supreme Court granted certiorari.