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argument is an argument to read the term “[taxes] accrued during
the taxable year” in section 535(b)(1) as meaning “[taxes]
finally determined for the taxable year”.3 That is a rule that
Congress easily could have stated. Congress, however, used the
term “taxes accrued”, and the term “accrued” has a settled
meaning, incorporating the all events test, for Federal income
tax purposes. See, e.g., sec. 1.446-1(c)(1)(ii)(A), Income Tax
Regs. In Estate of Goodall v. Commissioner, 391 F.2d 775, 800
(8th Cir. 1968), vacating and remanding T.C. Memo. 1965-154, the
Court of Appeals for the Eighth Circuit gave precisely that
meaning to the term “accrued” in a predecessor version of section
535(b)(1). If section 535(b)(1) is not clear on its face, the
Secretary’s interpretation is permissible, since it defines a
term in a way that is reasonable in light of the legislature’s
revealed design. Chevron U.S.A., Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 844 (1984).4 Although policy
3 That is, finally determined before the corporation’s
liability for accumulated earnings tax becomes final.
4 Petitioner suggests that the Chevron standard of review
should not apply because the accumulated earnings tax is in the
nature of a penalty. Even if we were to conclude that the final
sentence of sec. 1.535-2(a)(1), Income Tax Regs., is invalid on
that basis, it would not necessarily follow that petitioner would
be entitled to deduct from its 1995 accumulated taxable income
the amount of its 1995 Federal income tax deficiency as
determined by this Court. That is, if we were to invalidate the
final sentence of sec. 1.535-2(a)(1), Income Tax Regs., we would
still be required to interpret the meaning of the term “[taxes]
accrued during the taxable year” as used in sec. 535(b)(1). In
this regard, petitioner offers no support for the proposition
(continued...)
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