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BBcase[1] - Indiana University-Purdue University...

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Indiana University-Purdue University Indianapolis A556-Timing Issues in Taxation Case Study B&B Construction, Inc. Facts: B&B is a framing contractor, owned by two brothers (Ben and Bill Bridger), both of whom are in their 30s. Most of their business comes from high-end custom home builders and apartment builders, although they occasionally work on commercial projects. Their customers provide most of the materials, although B&B purchases some nails and screws and resells them to some customers at a markup. B&B is a C corporation using the accrual method and calendar year for both book and tax purposes. Their statements for the year 2008 are attached. The 2005, 2006 and 2007 income levels are similar to 2008. Activity is expected to be slightly higher in 2009. Revenues are expected to increase at the rate of 5% to 10% per year for the near future. Within the next 10 years they plan to start building some apartments, retail and office buildings for resale, for rent, or both. B&B was incorporated in 1982 and has always been on the accrual method. Since inception of the company, the bookkeeping has been quite competent. Tax returns have been filed meticulously. The company has never sought any creative tax advice. As you can tell from the statements, they do not purchase and resell a substantial amount of materials. They frame buildings with materials provided by the owner or general contractor. They do sell nails at a marked-up price, although they order for specific jobs and carry no inventories.
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