National Industrial Investors, Inc. - Page 32

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            subsidiary, however, was not paid immediately.  Then, in 1990                              
            after petitioner had liquidated the subsidiary, petitioner                                 
            received Lot 51 as compensation.  Neither the subsidiary nor                               
            petitioner ever included in income the earnings from these                                 
            services, but prior to trial petitioner conceded that it received                          
            $112,000 of services income for 1990 upon the receipt of Lot 51.                           
                  Nevertheless, petitioner did not concede negligence.                                 
            According to the regulations, income accrues "when all events                              
            have occurred which fix the right to receive such income and the                           
            amount thereof can be determined with reasonable accuracy."  Sec.                          
            1.451-1(a), Income Tax Regs.  It is unclear why petitioner                                 
            conceded that the service income accrued during a year in issue                            
            and not when petitioner's subsidiaries performed the work in the                           
            mid-1980s.  The record does not disclose the terms of the service                          
            contract or the specific services performed, nor does it disclose                          
            why IML delayed payment.  We therefore hold that respondent                                
            failed to prove that petitioner is liable for the negligence                               
            penalty attributable to the receipt of Lot 51.                                             
                  To reflect the above,                                                                
                                                      Decision will be entered                         
                                                under Rule 155.                                        

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Last modified: May 25, 2011