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liability, the amount of the liability can be determined with
reasonable accuracy, and economic performance has occurred with
respect to the liability. Secs. 1.446-1(c)(1)(ii)(A), 1.461-
1(a)(2), Income Tax Regs. The time when economic performance
occurs is determined in accordance with section 461(h) and the
regulations thereunder. These rules provide generally that:
(1) Where the liability requires the taxpayer to provide services
or property, economic performance occurs as the taxpayer incurs
costs in connection with satisfaction of the liability, sec.
461(h)(2)(B); sec. 1.461-4(d)(4)(i), Income Tax Regs.; (2) where
the liability arises out of the provision of services or property
to the taxpayer by another person, economic performance occurs as
the services or property is provided by that person, sec.
461(h)(2)(A)(i); sec. 1.461-4(d)(2)(i), Income Tax Regs.; (3)
where the liability arises out of the provision of insurance to
the taxpayer, economic performance occurs when payment is made to
the insurer, sec. 1.461-4(g)(5), Income Tax Regs.
Section 1.461-1(a)(2), Income Tax Regs., clarifies that a
liability that relates to the creation of an asset having a
useful life extending substantially beyond the close of the
taxable year in which the liability is incurred is taken into
account through capitalization, and may affect the computation of
taxable income in later years through appropriate cost recovery
deductions. See sec. 263; Commissioner v. Lincoln Sav. & Loan
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