Edward E. and Constance M. Thorpe - Page 19

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          Pension Plan Contribution                                                   

               Respondent argues that ETCO is not entitled to a $22,000               
          deduction claimed in its fiscal year ending June 30, 1990, by               
          remittance of a check for an alleged payment of a pension plan              
          contribution.  In general, a cash basis taxpayer may deduct                 
          expenses only "for the taxable year in which paid."  Sec. 1.461-            
          1(a)(1), Income Tax Regs.  Checks do not represent final payment            
          relieving a debtor of liability, but rather constitute only                 
          conditional payment which becomes absolute when the creditor                
          presents the check to the bank, which then honors it.  Md. Code             
          Ann., Com. Law I sec. 3-310(b)(1) (Michie 1997); Weber v.                   
          Commissioner, 70 T.C. 52, 57 (1978).  For Federal tax purposes,             
          the subsequent payment of the check relates back to the date of             
          delivery so as to allow deductions even where checks are                    
          presented and honored during later years.  Weber v. Commissioner,           
          supra at 57; see Clark v. Commissioner, 253 F.2d 745, 748 (3d               
          Cir. 1958), affg. in part, revg. in part, and remanding T.C.                
          Memo. 1956-176; Commissioner v. Bradley, 56 F.2d 728 (6th Cir.              
          1932), affg. 19 B.T.A. 49 (1930); Estate of Spiegel v.                      
          Commissioner, 12 T.C. 524 (1949).  But where the checks were not            
          presented and honored in due course, this Court has held that no            
          payment ever occurred because the condition upon which the                  
          conditional payment rested was never satisfied.  Weber v.                   
          Commissioner, supra at 57; Estate of Hubbell v. Commissioner, 10            

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