15
satisfy a definite liability can give rise to a deductible
expense. Whether the reserve payments are mandatory is not
dispositive of the issue of their deductibility. * * * In
Hradesky, we held that a cash basis taxpayer's required
payment of real estate taxes in escrow is not a deductible
payment until payment out of escrow is made to satisfy the
taxpayer's tax liability. Until payment is made of an
actual liability that is due, no deductible expense exists.
This rule has been followed for more than 60 years. * * *
Sebring v. Commissioner, 93 T.C. 220, 225-226 (1989) (citations
omitted).
Sections 162(a) and 512(a) do not allow petitioners to take
business expense deductions for funds deposited into their own
operating accounts. FSEP, Schoenstatt, and ACADA have not
established that they are entitled to deductions with respect to
"instant bingo" in excess of amounts allowed by respondent.
WSA has established that it paid $1,237.60 to its bookkeeper
during 1989. Respondent argues that WSA has failed to establish
that any portion of this amount is allocable to "instant bingo"
and that the amount allocable to WSA's tax-exempt income is not
deductible. Sec. 265. We find that WSA is entitled to a
deduction under sections 162(a) and 512(a) in the amount
determined by applying the ratio which WSA's instant bingo
proceeds bear to its total gross proceeds to the total fees of
$1,237.60.
Excess Contributions
The remaining issue for decision is whether WSA is entitled
to deduct as a business expense the entire amount of its payments
to outside charities.
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