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out of acts or failures to act more than three years
earlier. In the case of the workers’ compensation
claims, the liability arose from injuries more than
three years before the 1991 tax return. The federal
income tax deficiency interest stems from the acts of
filing tax returns in 1977, 1978, and 1979. [Host
Marriott Corp. v. United States, 113 F. Supp. 2d at
793; fn. ref. omitted.]
The District Court disagreed with the Commissioner’s
arguments that the taxpayer’s liability for interest on its
Federal tax deficiencies arose: (1) In 1991 when it signed a
settlement agreement for the taxable years 1977, 1978, and 1979;
or (2) on a daily basis as it failed to pay the taxes in dispute.
Id. at 793 n.2.
The Court of Appeals for the Fourth Circuit affirmed the
District Court’s holding by way of unpublished opinion.
We hold that the State tax deficiencies and interest on
Federal and State tax deficiencies in issue in the instant case
constitute specified liability losses within the meaning of
section 172(f). Unlike the legal and accounting costs that we
considered in Sealy Corp. v. Commissioner, 107 T.C. 177 (1996),
petitioner’s liability for State taxes, and interest thereon,
arose under the laws of the State of Michigan, and petitioner’s
liability for interest on its Federal income tax deficiencies
arose under Federal law--the Internal Revenue Code. State and
Federal law expressly impose the liabilities for tax and interest
at issue in this case.
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