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item. Respondent argues that petitioner fails to meet this
requirement because it had an actual, and not an apparent,
unrestricted right to income from utility fees that it collected
prior to 1987. See, e.g., Kraft v. United States, 991 F.2d 292,
299 (6th Cir. 1993); Bailey v. Commissioner, 756 F.2d 44, 47 (6th
Cir. 1985); Van Cleave v. United States, 718 F.2d 193, 196-197
(6th Cir. 1983); Prince v. United States, 610 F.2d 350, 352 (5th
Cir. 1980). Petitioner asks us to adopt the substantial nexus
test recently adopted in two separate Federal District Court
opinions on fact patterns nearly identical to the one at hand.
See Dominion Resources, Inc. v. United States, 48 F. Supp.2d 527
(E.D. Va. 1999); WICOR, Inc. v. United States, 84 AFTR2d 99-6905,
99-2 USTC par. 50,951 (E.D. Wis. 1999). We do not resolve this
dispute over the proper test, however, because of our conclusion
that petitioner does not satisfy another requirement for relief
under section 1341.
The second requirement that petitioner must satisfy, in
order to qualify for relief under section 1341, is that a
deduction must be allowable in the year of return for the refunds
that were made. Respondent argues that petitioner fails to meet
this requirement because petitioner’s rate reductions from 1987
to 1990 do not qualify as deductible expenses within the meaning
of section 1341(a)(2). Petitioner maintains that the right to
claim a deduction under section 162 for funds or property
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