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Commissioner, T.C. Memo. 1987-457, affd. without published
opinion 865 F.2d 255 (4th Cir. 1988).
Real McCoy was not a functioning business in 1991. By
petitioner’s own admission, it was just an idea in his mind that
never materialized. Petitioner took no formal actions to
establish Real McCoy as a going concern, and he has yet to
commence any sort of manufacturing activity. Moreover, Real
McCoy did not generate any revenue for petitioner and,
ultimately, never manufactured anything. In sum, even though
petitioner intended to someday build industrialized housing, he
failed to demonstrate that he actually carried on that activity
during 1991.
Petitioner did not incur a binding and enforceable liability
that would have entitled him to a deduction under section 162.
Generally, an accrual method taxpayer deducts expenses in the
year in which they are incurred, regardless of when they are
actually paid. Heitzman v. Commissioner, 859 F.2d 783, 787 (9th
Cir. 1988), affg. T.C. Memo. 1987-109. A liability is incurred
for income tax purposes in the tax year in which: (1) All events
have occurred that establish the fact of the liability; (2) the
amount of the liability can be determined with reasonable
accuracy; and (3) economic performance has occurred with respect
to the liability. Sec. 1.461-1(a)(2), Income Tax Regs.; see also
sec. 461(h). In order to be accruable, a liability must be
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