121 T.C. No. 14 UNITED STATES TAX COURT JIMMY D. WEAVER AND MARLENE M. MORLOC WEAVER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 8262-01. Filed October 8, 2003. P owned 80-percent interests in an S corporation (CL) and a C corporation (J). CL is an accrual method, calendar year taxpayer. J is a cash method, fiscal year taxpayer with a July 31 yearend. On each of its 1996 and 1997 Federal income tax returns, CL deducted an amount owed to J for services which J rendered to CL during the corresponding year. J included in its gross income for its taxable years ended in 1997 and 1998 the amounts deducted by CL for 1996 and 1997, respectively. CL had not as of Mar. 15, 1997 and 1998, paid to J any of those amounts which J included in its gross income. Held: CL fails the economic performance requirement of sec. 461(h), I.R.C., as to its deductions. That requirement, in conjunction with sec. 404(d), I.R.C., and the temporary regulations thereunder, mandates that CL deduct each amount for its taxable year the last day of which is within 2-1/2 months of the day on which the amount is includable inPage: 1 2 3 4 5 6 7 8 9 10 11 Next
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