A decision by the United States District Court for the Western District of Tennessee on February 23, 1999, has drawn attention once again to the question of when payment occurs for taxpayers on the cash method of accounting. The latest case, Owen v. United States, involved improvements to office condominiums which were paid by promissory note. The District Court held that payment had not yet occurred for the taxpayer (who was on the cash method of accounting) so the improvements did not add to the property’s income tax basis for purposes of figuring gain on sale. The case has important potential implications for farmers.



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