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expense is proper. First, all the events must have occurred
which establish the fact of the liability. Second, the amount
must be capable of being determined “with reasonable accuracy.”
Sec. 1.461-1(a)(2), Income Tax Regs. (accrual of deductions);
sec. 1.446-1(c)(1)(ii), Income Tax Regs. (accrual in general).
For the purpose of deciding this motion, only the first prong of
the test is relevant. For the purpose of the first prong of the
test the Supreme Court has stated that the liability must be
“final and definite in amount”, Security Flour Mills Co. v.
Commissioner, 321 U.S. 281, 287 (1944), “fixed and absolute”,
Brown v. Helvering, 291 U.S. 193, 201 (1934), in order to be
deductible. See also Helvering v. Russian Fin. & Constr. Corp.,
77 F.2d 324, 327 (2d Cir. 1935) (“The existence of an absolute
liability is necessary; absolute certainty that it will be
discharged by payment is not.”), affg. a Memorandum Opinion of
this Court.
Petitioner's deductions for anticipated warranty expenses in
1984 and 1985 were based on the theory that the last event
necessary to establish petitioner's warranty liability was the
sale of a vehicle to a dealer. Petitioner argues that the issue
we must decide “properly formulated, is whether Respondent has
established with a sufficient record of undisputed facts that he
is entitled to judgment as a matter of law that all events have
not occurred by the end of the 1984 and 1985 taxable years,
respectively, that determine the fact of Petitioner’s warranty
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