-8-
as ordinary income of the taxpayers in the
taxable year of receipt.
(8) Any future cash payments on notes
financing the purchase of the container, which
are either required by a court of law or by a
settlement based on pending litigation with
respect to the debt, will be allowed as an
operating expense in the year paid. [Item (4)
would then be superseded.]
Petitioners’ 1984 Federal Income Tax Return
On Schedule C attached to petitioners’ 1984 Federal income tax
return, petitioners claimed a $27,300 depreciation deduction and
reported a $27,300 net loss with respect to petitioner’s investment
in the FoodSource program. Also, on Form 3468, Computation of
Investment Credit, attached to their 1984 return, petitioners
claimed a $218 investment tax credit with respect to petitioner’s
investment in the FoodSource program. Respondent disallowed the
claimed depreciation deduction, investment tax credit, and loss.
OPINION
Issue 1. Validity of the Closing Agreement for 1984
Initially, we must determine whether the closing agreement
entered into by petitioners and respondent in August 1989 precludes
petitioners from claiming the disputed deduction, credit, and loss
for 1984. Petitioners contend that the closing agreement is
applicable only to those years enumerated therein (namely, 1979,
1980, 1982, and 1983), and hence has no applicability to 1984.
Respondent, on the other hand, contends that the closing agreement
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