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The parties also dispute whether respondent’s position gives
rise to an improper mismatching of income and expense. This
dispute is largely beside the point in light of our conclusion
that Random House’s obligation to pay royalties to its authors in
the year of sale, undiminished by the amounts withheld as "a
reasonable reserve for returns", constituted a proper accrual
under the all events test. Where, as here, both the income and
expense items relating to the same transaction meet the tax
requirements for accrual, matching is appropriate and desirable.
See 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).8
8 An exception to the deduction of an expense that
otherwise satisfies the all events test has been made under
circumstances in which payment of the expense would have been
delayed for such a substantial period that there was a violation
of the clear reflection of income standard. See Mooney Aircraft,
Inc. v. United States, 420 F.2d 400 (5th Cir. 1970) and Ford
Motor Co. v. Commissioner, 102 T.C. 87 (1994), affd. 71 F.3d 209
(6th Cir. 1995); see also Exxon Mobil Corp. v. Commissioner, 114
T.C. 293, 323 (May 3, 2000). Also, exceptions to the principle
that related income and expense items should be accrued in the
same taxable year have been made where the tax law specifically
requires, or permits, the acceleration, or deferral, of one, but
not both, of these items. See, e.g., Marcor, Inc. v.
Commissioner, 89 T.C. 181 (1987), where we allowed a current
deduction for certain preparation and installation costs under
circumstances in which the related fees for these services were
considered part of the payments for merchandise, the reporting of
which was deferred under the statutorily permitted installment
method. No such exception to the normal rules of expense accrual
or to the matching principle pertains to this case.
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