The Cleveland Trencher Company - Page 8

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          events test, as modified by the economic performance test, for              
          the deduction at issue.                                                     
               Whether a business expense has been "incurred" so as to                
          entitle an accrual basis taxpayer to deduct it under section                
          162(a) has long been governed by the "all events" test.  United             
          States v. General Dynamics Corp., 481 U.S. 239, 242 (1987);                 
          United States v. Hughes Properties, Inc., 476 U.S. 593, 600                 
          (1986); sec. 1.461-1(a)(2), Income Tax Regs.  In 1984, Congress             
          added to the Internal Revenue Code a new section 461(h) that                
          provides that in certain circumstances the all events test is not           
          met until "economic performance" occurs.  United States v.                  
          General Dynamics Corp., supra at 243 n.3; Halle v. Commissioner,            
          T.C. Memo. 1996-116; Spitzer Columbus, Inc. v. Commissioner,                
          T.C. Memo. 1995-397; sec. 1.461-4, Income Tax Regs.  Here                   
          economic performance occurred as AA&H provided to petitioner the            
          services covered by petitioner's obligation.  Sec.                          
          461(h)(2)(A)(i); sec. 1.461-4(d)(2), Income Tax Regs.2  Although            

               2Petitioner, although having listed the deduction as a                 
          commission expense deduction on its income tax return, claims on            
          brief that the disputed deduction was of interest on what it owed           
          to AA&H.  If the disputed amount is interest, then economic                 
          performance occurred as the interest cost economically accrued.             
          Sec. 1.461-4(e), Income Tax Regs.  However, petitioner adduces as           
          evidence for the assertion that the disputed amount is interest             
          only a credit memo of petitioner allowing a commission credit to            
          AA&H for the Turkey 25 Contract of $1,176,691.86.  Petitioner has           
          not shown how the interest economically accrued, nor how, to the            
          extent that interest did accrue, it is not included in as much of           
          the total deduction as respondent has allowed.  One of                      

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