- 16 -
contingency which may never be met. Because petitioner, under
the control of Matrix, may never be deemed to have met its goals
of a certain profit or cash-flow level or may in any given year
not be profitable at all, petitioner has taken deductions for
expenditures which might never occur. See United States v.
Hughes Properties, Inc., 476 U.S. at 601-603; Putoma Corp. v.
Commissioner, 601 F.2d at 739-740; Mooney Aircraft, Inc. v.
United States, supra at 406; Burlington-Rock Island R.R. v.
United States, supra at 818-820. We hold that the all events
test was not satisfied.
The second issue for determination is whether petitioner may
deduct interest accruals allegedly owed to its foreign parent on
the accrued but unpaid royalties. Petitioner has accrued
interest on the royalties payable to Matrix, and we have found
that the payment of those royalties is contingent. It follows
that the accrued interest may not be regarded as an accrued
expense until the years in which the contingency is satisfied and
the obligation to pay the royalties becomes fixed and absolute.
Burlington-Rock Island R.R. v. United States, supra at 819
(citing Pierce Estates, Inc., v. Commissioner, 195 F.2d 475, 477-
478 (3d Cir. 1952), revg. 16 T.C. 1020 (1951)); see also Fox v.
Commissioner, 874 F.2d 560, 563 (8th Cir. 1989), affg. T.C. Memo.
1987-209; Putoma Corp. v. Commissioner, 601 F.2d at 740.
Finally, respondent determined that petitioner is liable for
accuracy-related penalties under section 6662. Section 6662(a)
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