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contests the Commissioner’s determination and may continue to
contest it after our decision is entered, the “all events test”
has not been met. Our prior holdings and those of the Supreme
Court support that result.
For those reasons, we disagree with the holding and
rationale of the Court of Appeals for the Fifth Circuit and
continue to adhere to our established precedent. We hold that no
part of petitioner’s paid, but contested, income tax deficiency
should be reduced from its taxable income in arriving at
accumulated taxable income under section 535(b)(1).
III. Whether the Amount of the “Tax Attributable” Adjustment to
Capital Gains That Is Used To Arrive at the Accumulated Earnings
Tax Base Should Be Limited to Petitioner’s Reported Tax Liability
for the Year
Petitioner argues, as its third and final alternative, that
respondent’s computation of the adjustment for capital gains is
understated. Petitioner argues that the tax attributable
adjustment should be limited to the actual overall tax liability
reported or a duplication of tax burden would result. Respondent
contends that his adjustment follows the literal requirements of
section 535(b)(6)(A).
16(...continued)
contesting the deficiency, a taxpayer ensures that the tax may
not be assessed or collected. Even though a deficiency is paid
after the filing of a petition, if a taxpayer continues to
contest it, the tax is not assessed. Normally, payment during
the course of a prepayment (deficiency) forum is used to stop the
running of interest and is treated more like a deposit should an
income tax deficiency be ultimately decided.
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