Appeal of Mueller Metals Co.

*172OPINION.

: In this appeal the taxpayer alleges that the Commissioner was in error in allocating to the fiscal year ended November-30, 1919, the amount of $40,000, derived from its contract with the-Port Huron Chamber of Commerce. From the evidence in the record, we sustain the contention of the taxpayer. The facts are simple. By the terms of the contract the H. Mueller Manufacturing Co., Ltd., or its assigns, was to expend at least $400,000 in the construction of; a manufacturing plant, and the Chamber of Commerce was to pay the said company $40,000. Payments were to be made by the; *173Chamber of Commerce on a basis of 10 per cent of the money expended for labor. The taxpayer, composed of the same stockholders, as the Canadian Company, took over the contract and assumed the-obligations. Over this there is no dispute. The taxpayer has more than fulfilled its part of the contract. Prior to November 30, 1918,. it had expended $419,118 for buildings, $754,930.02 for machinery and equipment, and $447,047.32 for operating labor, or a total of $1,621,095.74. In addition to this, it was actually manufacturing and delivering its products. The Chamber of Commerce during this fiscal year had paid $26,015 in cash. The reason for the delay in paying the balance of the $40,000 does not appear in the record, but it was subsequently paid. Under the terms of the contract, according to the evidence adduced, the entire amount of $40,000 was clearly earned prior to November 30,1918. The books of the taxpayer were kept on the accrual basis. It is true there was a book entry of March 12, 1918, charging this amount to the Port Pluron Chamber of Commerce and crediting the H. Mueller Manufacturing Co., Ltd., and a subsequent correction November 30, 1919, under a loss and recovery account, but this has been satisfactorily explained. Irrespective of these entries, however, the undisputed facts clearly indicate that this amount did not accrue to the taxpayer during the fiscal year ended November 30, 1919.