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because (1) payments into the BUF accounts were not offsettable
against gross receipts or deductible in any year, and (2)
petitioner had no intention of including those amounts in his
income in any future year, the offsets claimed with respect to
the payments into the accounts effected a permanent avoidance of
reporting of income and a distortion of petitioner’s lifetime
income.
In response to petitioners’ arguments regarding Schuster’s
Express, respondent argues that the change in petitioner’s
practice of offsetting payments into the BUF accounts against
gross receipts involves the appropriate time for taking those
amounts into account and therefore constitutes a change in
accounting method. Respondent contends that the offsets claimed
with respect to the payments into the BUF accounts would
eventually be matched by payments of actual liabilities from the
accounts and the receipt by petitioner of the remaining balances
of the accounts when they were terminated by Associated,
petitioner’s surety. Thus, according to respondent, any balances
refunded would be required to be included in petitioner’s income
pursuant to the relevant case law and the tax benefit rule.
Petitioners argue that: (1) Respondent has raised the issue
of the tax benefit rule for the first time on brief; (2) they
have been denied the opportunity to present evidence concerning
its applicability, such as evidence concerning the extent to
which prior deductions did not result in a tax benefit and expert
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