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Ultimately, the authors were entitled to be paid (and, in
fact, were paid) royalties on all books that were sold and not
actually returned, including unreturned books for which payment
was never received by Random House. Therefore, based upon the
parties’ conduct under the contracts, we find that the withholding
of royalties representing a reasonable reserve for returns
constituted a delay in the payment of royalties otherwise due the
authors for each statement period in anticipation of actual
returns during the subsequent statement period.
b. Discussion of Authorities
We agree with petitioner that this case is governed by the
rule of law which states that the deduction of a liability that
otherwise satisfies the all events test is not negated by the
taxpayer’s right to defer payment of the liability pending the
occurrence (or nonoccurrence) of some event after the close of the
taxable year. See Lawyers’ Title Guar. Fund v. United States, 508
F.2d 1, 6 (5th Cir. 1975); W.S. Badcock Corp. v. Commissioner,
supra; Ohmer Register Co. v. Commissioner, 131 F.2d 682, 686 (6th
Cir. 1942), revg. a Memorandum Opinion of this Court; Central Cuba
Sugar Co. v. Commissioner, 198 F.2d 214, 217-218 (2d Cir. 1952),
affg. in part and revg. in part 16 T.C. 882 (1951); Warren Co. v.
Commissioner, 46 B.T.A. 897, 913-914 (1942), affd. 135 F.2d 679,
rehearing denied 136 F.2d 685 (5th Cir. 1943). As stated by the
Court of Appeals for the Fifth Circuit in Lawyers’ Title Guar.
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