This post has been revised to incorporate comments the author received regarding the potential application of Reg. §1.162-12 to resolve the issue independently of how the Court actually decided the case.

In Agro-Jal Farming Enterprises, Inc. et al v. Commissioner, 145 TC No. 5 the Tax Court was asked to determine if a farmer reporting on the cash basis of accounting could claim a deduction for packaging materials as payment was made for the materials or if the taxpayer rather could only deduct the amounts as the materials were used.