SEVENTIETH CONGRESS . SEss. I. Cg. 852 . 1928 . Part IV-Accounting Periods and Methods of Accounting SEC. 41. GENERAL RULE. The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in ac cord ance wit h the me thod of acco unti ng r egul arly emplo yed in keeping the books of such taxpayer ; but if no such me thod of ac counting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the Commissioner doe s cle ar ly re fle ct the income . If the taxpayer's annual accounting period is other than a fiscal year as defined in section 48 or if the taxpayer has no annual accounting period or does not keep books, the net income shall be computed on the basis of the calendar year . (For use of inventories, see section 22(c) .) SEC. 42. PERIOD IN WHICH ITEMS OF GROSS INCOME INCLUDED . The amount of all items of gross income shall be included in the gr oss inco me for t he taxab le year in which receive d by the taxpaye r, unless, under methods of accounting permitted under section 41, any such amounts are to be properly accounted for as of a different period . SEC. 43. PERIOD FOR WHI CH DEDUCTIONS AND CR EDI TS TAKEN . The deductions and credits provided for in this title shall be taken for the taxa ble year in which "p aid or acc rued" or " paid or incurred", dependent upon the method of accounting upon the basis o f w hic h t he net in com e is computed, unless in order to clea rly reflect the income the deductions or credits should be taken as of a different period . SEC. 44 . INSTALLMENT BASIS . (a) De alers in persona l property .-U nde r regulations pre sc rib ed by the Co mmis sion er w ith the appr oval of the Secr etar y, a per son who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the gross profit realized or to be realized when payment is completed, bears to the total contract price . (b) Sales of realty and casual sales of personalty .-In the case (1) of a casual sale or other casual disposition of personal prop- ert y (other than pr operty o f a kind which w ould pro perly be include d in the inventory of the taxpayer if on hand at the close of the taxable year), for a price exceeding $1,000, or (2) of a sale or other disposi- tion of real property, if in either case the initial payments do not e xceed 40 per centum of the selling price, the income may, under regulations prescribed by the Commissioner with the approval of the Secretary, be returned on the basis and in the manner above prescribed in this section . As used in this section the term " initial payments " means the payments received in cash or prope rty o ther than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made. (c) Chang e from accrual to installment b asis .-If a taxpay er entit led to the ben efit s of sub sect ion (a) elec ts for any t axab le y ear to report h is net i ncome on the ins tallment basis, then in computin g his income for the year of change or any subsequent year, amounts actually received during any such year on account of sales or other dispositions of property made in any prior year shall not be excluded . 805 INCOME TAX Ac coun ting peri ods and methods. General rule . Net income co m- puted on basis of an- nual accounting period . If no accounting pe- riod, on calendar year . Inventories . Ante, p . 799. Gro ss income . Item s for taxab le year in which received . Deductions and credits. For taxable year in which "paid or ac- crued" or "paid or in- curre d ." In stall ment basi s . Dealers in personal property may make re- turns on, of payments ac tuall y re ceive d . Retu rns of inco me from casual sale of per- sonalty or of realty. Co mput ation of in- come on change to in stall ment basi s .
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