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As stated by the Supreme Court in Dixie Pine Prods. Co. v.
Commissioner, supra at 519:
in order truly to reflect the income of a given year,
all the events must occur in that year which fix the
amount and the fact of the taxpayer’s liability for
items of indebtedness deducted though not paid; and
this cannot be the case where the liability is
contingent and is contested by the taxpayer. * * *
[Fn. refs. omitted.]
In section 1.461-2(b)(2), Income Tax Regs., definition of a
“contested liability” is provided, as follows:
Any contest which would prevent accrual of a liability
under section 461(a) shall be considered to be a
contest in determining whether the taxpayer satisfies
paragraph (a)(1)(i) of this section. A contest arises
when there is a bona fide dispute as to the proper
evaluation of the law or the facts necessary to
determine the existence or correctness of the amount of
an asserted liability. * * *
Generally, whether a bona fide dispute exists as to the
proper law and facts, whether a liability is contested, and when
a contested liability is resolved involve questions of fact to be
answered on the basis of the facts and circumstances of each
particular situation. See Phillips Petroleum Co. & Affiliated
Subs. v. Commissioner, T.C. Memo. 1991-257.
In General Communication Co. v. Commissioner, 33 T.C. 640,
654 (1960), we stated as follows:
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