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taxes and interest on Federal and State taxes constitute
specified liability losses within the meaning of section
172(f)(1)(B) because: (1) The liabilities arose out of State and
Federal law; (2) the acts (or failures to act) giving rise to the
liabilities occurred during the years 1986, 1987, and 1988--more
than 3 years before 1992; and (3) all its members used the
accrual method of accounting throughout the period during which
the acts or failures to act giving rise to the liabilities
occurred.
Respondent maintains that the disputed taxes and interest do
not constitute specified liability losses on the ground that
section 172(f)(1)(B) was intended only to apply to a "narrow
class of liabilities", such as tort and product liability
expenses, to which the taxes and interest in question do not
belong. Respondent further contends that, assuming arguendo that
the disputed Federal and State interest payments constitute
specified liability losses in the first instance, a portion of
those interest payments do not qualify for carryback under
section 172(f)(1)(B)(i) because they were not incurred at least 3
years prior to the beginning of the taxable year 1992.
Specifically, respondent contends that all interest that accrued
4(...continued)
sec. 172(b)(1)(C), specified liability losses may not be carried
back to any taxable year beginning before Jan. 1, 1984. OBRA
1990 sec. 11811(b)(2)(B), 104 Stat. 1388-533.
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