Ezel / IRS Rulings / 200948058

CCA 200948058: An advance payment for goods may be allocated across the delivery period

Number
200948058
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
General Rule for Inventories
Topics
Accounting methods and periods
Code sections
§ 471, § 6110
Publicly released
November 27, 2009
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2009
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

This Chief Counsel Advice considers an advance payment under a contract for delivery of inventoriable goods over several years. Counsel states that prorating the payment based on the actual volume delivered suggests that the payment is not allocable to any one year. On that reasoning, the advice concludes that the taxpayer had not received substantial advance payments.

Ruling snapshot

  • Question: Does an advance payment under a multi-year goods-delivery contract constitute a substantial advance payment when it is prorated based on actual volume delivered?
  • Outcome: Advice given
  • Key authorities: IRC § 471

Full text (IRS public release)

ID: CCA-871128-08 Number: 200948058
Release Date: 11/27/2009
Office:
UILC: 471.00-00

From: --------------------
Sent: Thursday, August 07, 2008 11:28 AM
To: ----------------------------------------------
Cc: --------------------------------------------------------------- Subject: RE: advance payment for inventoriable goods

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My reaction is that this is a single contract for delivery of goods over a number of years. The fact that the advance payment is to be prorated based on actual volume delivered seems to indicate that the payment is not allocable to any one year. I would say that the taxpayer has not received substantial advance payments.

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