United Parcel Service of America - Page 2




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                       MEMORANDUM FINDINGS OF FACT AND OPINION                        

               RUWE, Judge:  Respondent determined deficiencies in                    
          petitioner's Federal income taxes and additions to tax as                   
          follows:                                                                    
                              Additions to Tax                                        
               Year Deficiency Sec. 6653(a)(1)  Sec. 6653(a)(2)  Sec. 6661            
               1983 $2,330,687      --      --   --                                   
               1984  64,870,674    $3,243,534     50% of the      $11,280,731         
                                        interest due                                  
                                        on $45,122,925                                
          Respondent also determined that petitioner is liable for                    
          increased interest pursuant to section 6621(c)1 on the portion of           
          the 1984 deficiency attributable to respondent's determination              
          that excess value charges are includable in petitioner's income.            
               After concessions,2 the issues for decision are:                       

               1Unless otherwise indicated, all section references are to             
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.                                                                  
               2Respondent concedes that $8,855,121 of income earned on               
          funds invested by Overseas Partners, Ltd. (OPL), is not income to           
          petitioner pursuant to sec. 482.  Respondent determined that if             
          petitioner must include excess value charges in gross income,               
          petitioner is entitled to a corresponding deduction of                      
          $32,543,889 for shippers' claims.                                           
               Respondent concedes that $325,740 of the $1.2 million paid             
          Liberty Mutual Insurance Group (Liberty Mutual) for claims                  
          adjustment services is deductible.  Respondent further concedes             
          the deductibility of $50,000 paid by petitioner to Liberty Mutual           
          for the retained layer of liability for losses above $250,000.              
          These concessions reduce the amount of the deduction at issue               
                                                             (continued...)           




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