- 10 - adjustment4 increasing petitioners’ income pursuant to section 481(a). As set forth in our findings above, from 1968 through 1988, petitioner treated the payments made into the BUF accounts as a cost of goods sold, offsetting the gross receipts of his business. Petitioner did not deduct from his taxable income disbursements from those accounts to reimburse Associated for losses and expenses incurred as a result of bond forfeitures. In Sebring v. Commissioner, 93 T.C. 220, 224-227 (1989), we held that payments into BUF accounts were not deductible when made and that deductions are allowed only for disbursements made to satisfy liabilities.5 We reasoned that payments into the accounts were “in the nature of a security deposit held for payment of future liabilities.” Id. at 226. Petitioners concede that Sebring controls the tax treatment of payments into and disbursements from petitioner’s BUF accounts and that petitioner’s prior practice of offsetting payments made into the BUF accounts against gross receipts was incorrect. We must accordingly consider whether the change that was required by respondent for purposes of bringing the tax treatment 4 The amount of the adjustment, $146,499, essentially represents the Jan. 1, 1988, opening balances of the BUF accounts maintained in connection with petitioner’s bail bond business, less interest accumulations. 5 The taxpayer in that case, like petitioner, used the cash receipts and disbursements method of accounting. Sebring v. Commissioner, 93 T.C. 220, 221 (1989).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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