G. Dastgir and Mary A. Qureshi - Page 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                    would then be superseded.]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.            
          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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