Westpac Pacific Food v. Commissioner

Westpac (plaintiff), a grocery-store purchasing syndicate, received roughly $5 million annually in cash advances from suppliers as volume-purchase discounts, which Westpac kept if it purchased the agreed inventory volume at full price but had to repay, prorated, if it purchased less; Westpac, an accrual-basis taxpayer, booked the advances as a liability and offset it as purchases occurred. The Commissioner (defendant) sought to tax the advances as income in the year received; the Tax Court agreed with the Commissioner, and Westpac appealed.

Whether, for federal tax purposes, a cash advance contingent on the recipient's future performance is taxable as income at the time it is received.