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his other expenses associated with bond forfeitures in 1988 from
sources other than the BUF accounts.
Petitioner does not have access to his BUF accounts until
the agreement is terminated and all outstanding bonds and all
other liabilities petitioner may have to Associated are
satisfied. Either petitioner or Associated may terminate the
agreement, with or without cause, subject to certain notice
requirements. Upon termination of the agreement and satisfaction
of all liabilities secured by the BUF accounts, the balance in
the BUF accounts is required to be released to petitioner.
On his tax returns since 1968, petitioner offset his gross
receipts by the amount contributed to his BUF accounts as a
portion of cost of goods sold. However, the parties have
stipulated that the offsets claimed by petitioner for payments to
the BUF accounts are not properly claimable in any taxable
period. Rather, if a forfeiture occurs and Associated is paid
out of a BUF account, the amount so paid is properly deductible
in the year payment is made. Petitioner reported most, but not
all, of the interest accumulated on his BUF accounts on his
Federal income tax returns for the taxable years 1968 through
1988.
Pursuant to the practice used by petitioner for accounting
for his BUF accounts from 1968 through 1988, petitioner did not
claim as deductions on petitioners’ tax returns forfeitures or
summary judgments paid from the BUF accounts maintained for him.
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Last modified: May 25, 2011