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(1) Whether amounts collected by petitioner as "excess
value charges" (EVC's)3 from its customers must be included in
gross income in 1984 pursuant to section 61. We hold that EVC's
must be included in petitioner's income.4
(2) Whether petitioner is entitled to deductions under
section 162 for any amounts paid to National Union Fire Insurance
Co. of Pittsburgh, Pennsylvania (NUF). We hold that petitioner
is not entitled to those deductions.
(3) Whether respondent properly disallowed petitioner's
deduction of $11,151,675 paid to Liberty Mutual Insurance Group
(Liberty Mutual) as California workers' compensation premiums.
We hold that the deduction is allowable.
(4) Whether petitioner is liable for an addition to tax
pursuant to section 6653(a)(1) and (2) for negligence or
2(...continued)
with respect to the Liberty Mutual policy to $11,151,675.
In the notice of deficiency, respondent disallowed sec. 38
investment tax credits of $1.6 million and $19,006,175 reported
by petitioner in 1983 and 1984, respectively. On Sept. 15, 1997,
the parties filed a Joint Motion to Sever, requesting that the
Court sever the investment tax credit issue. On Sept. 15, 1997,
the motion to sever the sec. 38 investment tax credit was
granted. The parties subsequently engaged in mediation and
settled this issue.
3Throughout the opinion, "EVC" represents "excess value
charge" and "EVC's" represents "excess value charges".
4As a result of our holding, we need not consider
respondent's alternative arguments under secs. 482 and 845(a).
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