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1(a)(1), Income Tax Regs. It is a well-established principle
that a contribution to a reserve account for future liabilities
is not deductible. See Sebring v. Commissioner, 93 T.C. 220
(1989); World Airways, Inc. v. Commissioner, 62 T.C. 786 (1974);
Commercial Liquidation Co. v. Commissioner, 16 B.T.A. 559 (1929).
The contribution may become deductible once it is withdrawn and
used to pay a definite liability. See Sebring v. Commissioner,
supra at 225.
None of the deposits into the reserve account were withdrawn
and used to pay deductible expenses during 1992 or 1993. We
therefore conclude that petitioners are not entitled to
deductions for their deposits into the reserve account for 1992
or 1993.
III. Section 6673 Penalty
Section 6673(a)(1) provides that, whenever it appears to the
Tax Court that proceedings have been instituted or maintained by
the taxpayer primarily for delay or that the taxpayer's position
in such proceedings is frivolous or groundless, the Court may
impose a penalty not in excess of $25,000. A petition to the Tax
Court is frivolous "if it is contrary to established law and
unsupported by a reasoned, colorable argument for change in the
law." Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986).
Based on well-established law, petitioners' positions are
frivolous and groundless.
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