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Albert W. Todd, a C.P.A. with 37 years of experience,
prepared the corporation’s Federal income tax returns, and he was
experienced in agricultural accounting issues. He had more than
one client with exposure to section 263A, and, prior to the time
of the filing of the corporation’s 1991 return, Mr. Todd
concluded that deferral of the decision to deduct the
developmental costs was prudent and that the 1989, 1990, and 1991
expenses would be deductible on the 1991 return. After
researching section 263A, Mr. Todd concluded that the U.S.
Department of the Treasury had not issued regulations and/or
guidance as to the nationwide weighted averages for citrus
plants, that no other guidelines existed, and that there was no
requirement that taxpayers determine nationwide guidelines. In
that setting, Mr. Todd advised the corporation to make a decision
based on its individual experience as to whether section 263A
applied.
Pelaez and Sons, Inc.’s, 1991 tax return was mailed on or
about January 10, 1992, and was received by the IRS on January
13, 1992. The notice upon which this case is based was mailed
June 2, 1997. The corporation’s 1991 taxable year was closed
when the June 2, 1997, notice was mailed. In calculating the
adjustments in the notice, respondent reversed and included in
1992 income the 1991 deduction of $1,171,949 for the 1989 tree
developmental expenses.
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