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year of the sales or whether the deduction must be
reduced to the extent that payment of the royalties is
withheld as "a reasonable reserve for returns".
Held: The royalties are fully deductible in the
year of sale.
Bernard J. Long, David E. Mills, and James R. Saxenian, for
petitioner.
Gary D. Kallevang and William J. Gregg, for respondent.
MEMORANDUM OPINION
HALPERN, Judge: Both petitioner Advance Publications Inc.
(petitioner) and respondent have moved for partial summary
judgment. Each party objects to the other’s motion. The issue
common to those motions (petitioner’s motion, respondent’s motion
or, together, the motions) is whether petitioner’s deduction for
royalties owed to book authors under agreements between its
publisher subsidiaries and the authors was properly computed for
petitioner’s 1989 and 1990 taxable (calendar) years (the audit
years) by not taking into account a reduction in the royalty
payments to authors for "a reasonable reserve for returns".
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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