Sealy Corporation and Subsidiaries, f.k.a. The Ohio Mattress Company and Subsidiaries, et al. - Page 16

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                We conclude that petitioners' compliance costs and other                     
          accounting expenses were not liabilities that arose under Federal                  
          or State law.                                                                      
          C.    Whether the Act or Failure To Act Which Gave Rise to the                     
                Liability Occurred at Least 3 Years Before the Taxable                       
                Years at Issue                                                               
                To be a specified liability loss under section 172(f)(1)(B),                 
          the act giving rise to the liability under a Federal or State law                  
          must have occurred at least 3 years before the start of the                        
          taxable year.  Sec. 172(f)(1)(B)(i).  Petitioners’ contention                      
          that they meet this requirement follows from their contention                      
          that their liability to pay those costs arose under Federal law                    
          to which they were made subject more than 3 years before the                       
          years at issue.  We disagree for the reasons stated above at par.                  
          B.  Petitioners make no other argument that the liability at                       
          issue arose more than 3 years before the years at issue.  Thus,                    
          we conclude that petitioners do not meet this requirement.                         
          D.    Conclusion                                                                   
                We hold that petitioners’ professional fees and IRS                          
          examination expenses are not specified liability losses under                      
          section 172(f)(1)(B), and thus are not eligible for the 10-year                    
          carryback under section 172(b)(1)(C).                                              
                To reflect the foregoing and concessions,                                    
                                                      Orders will be issued                  
                                                 denying petitioners' motions                
                                                 for partial summary judgment.               




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