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the tax adjustments relate). In the latter situations, because
of the uncertainties relating to the appropriate adjustments to
be made, the taxpayers' liability therefor is to be regarded as
not sufficiently fixed and definite until the agreements relating
to the tax adjustments are entered into in a clear and formal
manner. In such situations, for Federal income tax purposes, the
statutory interest relating to the eventually agreed-upon tax
adjustments is not accruable until the agreements are entered
into and are clearly established.
Exxon relies on language in section 1.461-2(b)(2), Income
Tax Regs., that describes certain “affirmative” acts that are to
be treated as commencing a protest of an asserted liability.
That language provides as follows:
An affirmative act denying the validity or accuracy, or
both, of an asserted liability to the person who is
asserting such liability, such as including a written
protest with payment of the asserted liability, is
sufficient to commence a contest. Thus, lodging a
protest in accordance with local law is sufficient to
contest an asserted liability for taxes. It is not
necessary that the affirmative act denying the validity
or accuracy, or both, of an asserted liability be in
writing if, upon examination of all the facts and
circumstances, it can be established to the
satisfaction of the Commissioner that a liability has
been asserted and contested.
We do not construe the above language as necessarily
requiring a particular affirmative act of protest or litigation
to a proposed tax adjustment in order for the adjustment to be
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