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period as of Dec. 31, 1986. Held, further, P’s rate
reductions from 1987 through 1990 to compensate for
excess deferred Federal income tax are not deductible
business expenses within the meaning of sec. 1341, and,
therefore, P is not entitled to the beneficial
treatment of sec. 1341.
David E. Jacobson and Richard P. Swanson, for petitioner.
Robert M. Morrison and J. Anthony Hoefer, for respondent.
COHEN, Judge: Respondent determined the following
deficiencies in the Federal income tax of MidAmerican Energy
Company (petitioner):
Tax Year Ended Deficiency
Dec. 31, 1984 $ 698,682
Dec. 31, 1987 171,396
Dec. 31, 1988 994,913
Dec. 31, 1989 1,457,191
Dec. 31, 1989 715,208
Nov. 7, 1990 391,914
Dec. 31, 1990 5,121,384
On November 7, 1990, a merger took place, resulting in a short
tax year.
After concessions by the parties, the issues for decision in
these consolidated cases are whether petitioner’s accrual of
income from furnishing utility services was in accordance with
section 451(f) and whether the amount reported by petitioner
pursuant to section 481 for 1986 adequately reflects the change
in accounting method under section 451(f) (the unbilled revenue
issues), and whether petitioner is entitled to relief under
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