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of the all events test is satisfied if a statute in part works to
fix the liability. We do not agree. In both Hughes Properties
and General Dynamics the Supreme Court focused on the last event
that created the liability. In Hughes Properties the event
creating liability was the last play of the machine before the
end of the fiscal year. Because the Nevada statute fixed the
amount of the irrevocable payout, that play crystalized or fixed
absolutely the taxpayer’s liability, thus satisfying the first
prong of the all events test. In General Dynamics, the last
event that created the liability was the employee filing the
claim for reimbursement.
We are unable to find sufficient differences between the
facts in General Dynamics and those of the instant case to
justify departing from the Supreme Court’s analysis. Here, as in
General Dynamics, the last event fixing liability does not occur
before the presenting of a claim, either a claim for warranty
service by the customer through one of petitioner’s dealers or a
claim for reimbursement made on petitioner by the dealer.
The Supreme Court stated:
It is fundamental to the "all events" test that,
although expenses may be deductible before they have
become due and payable, liability must first be firmly
established. This is consistent with our prior
holdings that a taxpayer may not deduct a liability
that is contingent, see Lucas v. American Code Co., 280
U.S. 445, 452, (1930), or contested, see Security Flour
Mills Co. v. Commissioner of Internal Revenue, 321 U.S.
281, 284, (1944). Nor may a taxpayer deduct an
estimate of an anticipated expense, no matter how
statistically certain, if it is based on events that
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