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misplaced.
In Hughes Properties, the taxpayer was a Nevada casino that
was required by State statute to pay as a jackpot a certain
percentage of the amounts gambled in progressive slot machines.
The taxpayer was required to keep a cash reserve sufficient to
pay the guaranteed jackpots when won. Hughes Properties at the
conclusion of each fiscal year entered the total of the
progressive jackpot amounts (shown on the payoff indicators) as
an accrued liability on its books. From that total, it
subtracted the corresponding figure for the preceding year to
produce the current tax year's increase in accrued liability. On
its Federal income tax return this net figure was asserted to be
an ordinary and necessary business expense and deductible under
section 162(a). The Court found that the all events test had
been satisfied and the taxpayer was entitled to the deduction.
The Court reasoned that the State statute made the amount shown
on the payout indicators incapable of being reduced. Therefore
the event creating liability was the last play of the machine
before the end of the fiscal year, and that event occurred during
the taxable year.
We conclude that the cases cited by petitioner do not
strictly stand for the proposition that if a liability is fixed
4(...continued)
Collieries Co. v. Commissioner, 77 T.C. 1369 (1981) (Court
reviewed); Buckeye Intl., Inc. v. Commissioner, T.C. Memo.
1984-668.
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