Buyers Home Warranty Company - Page 4

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          recognized.  (Except for 1988, when it deducted 20 percent of the           
          entire amount of contracts written in 1988.)  It described this             
          deduction as "provisions for reserves."  Thus, continuing the               
          example used above, when it recognized $110 in year 1, petitioner           
          would take a deduction of $22 in year 1 ($110 x .2) and called              
          this deduction a "provision for reserve."  In year 2, petitioner            
          would recognize as income the "provision for reserve" deduction             
          from the prior year.  Thus, in year 1, petitioner effectively               
          reported $88 ($110 - $22).  In year 2, petitioner reported $152             
          ($130 + $22).                                                               
               Respondent commenced an examination of petitioner's 1990 and           
          1991 returns in March 1993.  (Later during the examination 1992             
          was included.)  Prior to the commencement of the examination,               
          petitioner made no application to respondent with respect to                
          changing its method of accounting for its income and deductions.            
          During respondent's examination of petitioner, the issue arose as           
          to whether the home warranty contracts constitute insurance                 
          contracts for purposes of section 832.  To resolve that issue,              
          the parties participated in obtaining technical advice from                 
          respondent's national office.  This process of obtaining                    
          technical advice was initiated by respondent's revenue agent by             
          means of a memorandum (Form 4463, Request for Technical Advice              
          From Associate Chief Counsels (Technical) and (International))              
          dated June 17, 1993.  Petitioner participated in the technical              





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