Daniel E. and Karen A. Harkins - Page 16

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          of the calendar year to make the payment related to the marketing           
          funds for the last half of the calendar year.  The right to the             
          marketing funds simply depended on the theater company's                    
          performing as provided in the agreement during 1996.                        
               There is no evidence in the record indicating that the                 
          theater company did not perform as called for in the agreement              
          during the 1996 tax year.  Mr. Harkins, as president of the                 
          theater company, was in the best position to know the state of              
          his business by the end of 1996.  He had control of all the                 
          records and information related to the theater company.  At                 
          trial, he did not indicate any circumstances occurring by the end           
          of 1996 inconsistent with the theater company's performance                 
          obligations under the agreement.10  Therefore, because the                  
          theater company had performed in 1996 as provided for in the                
          agreement, the payment made in 1997 for the marketing funds for             
          the last half of 1996 should have been accrued in 1996.                     
               Petitioners additionally argue that if the theater company             
          had failed to perform on the agreement during the 60-day period             

               10  Mr. Harkins did testify that on one occasion, the                  
          machine used to produce fountain soft drinks at one of his movie            
          theaters had stopped working.  In order to provide customers with           
          soft drinks, a movie theater manager had purchased “Coke” bottles           
          (by accident) at a local store.  When Mr. Harkins arrived at the            
          movie theater, he immediately told the manager to remove the                
          “Coke” bottles from the movie theater.  Mr. Harkins did not                 
          indicate whether this incident occurred in 1996, and petitioners            
          do not cite this incident as a basis for nonperformance on the              

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