BIR Ruling No. 261-61

June 23, 1961 BIR RULING NO. 261-61 Reference is made to your letter . . . inviting attention to the inconsistency of the ruling contained in our Ruling No. 210, series 1961, wherein it was held that sales under an open account are not installment sales but for purposes of Section 43(c) of the Tax Code collections in the year of change or subsequent years of amounts under open account sales made prior to January 1, 1959 to June 30, 1959 shall be included but only to the extent of 10% thereof and that collections made from July 1, 1959 and thereafter shall be returned in full. Please be informed that the provisions of Section 43(c) requiring a taxpayer to include in the computation of its net income from installment sales for the year of change from the accrual to the installment basis or any subsequent year amounts received on account of sales made in a year prior to the change are applicable only where a taxpayer elects to change its method of reporting installment sales income from the accrual to the installment basis. Furthermore, such provisions refer only to amounts received on account of installment sales made in prior years, not to amounts received on account of sales on open account. (Rev. Ruling 54-111, CB 1954-1, p. 76, Fn 25, Merten's Law of Federal Income Taxation, Chapter 15, p. 30, Section 15.3) Accordingly, collections made by your client, the Ysmael Steel Mfg. Co., of amounts in the year of change on account of sales under open account sales made prior to the year of change either during the period when it was enjoying full or partial exemption from the income tax or when it became fully taxable shall not be included. BIR Ruling No. 210, current series, is hereby accordingly modified. Please be further informed that in the aforecited Rev. Ruling 54-11, it was held that a regular dealer in personal property may elect to report income from installment sales on the installment basis and continue to report income from sales on open account on the accrual basis. Your client may therefore adopt this method of reporting income from installment and open account sales. cdtech