- 6 - The parties agree that Clarkston may deduct the fees upon its satisfaction of the all events test under section 461(h).1 The parties disagree as to whether Clarkston satisfied this test. According to respondent, Clarkston fails this test in that it does not meet the timing rule of section 404(d). Respondent asserts that this rule must be met because the fees were for services rendered, and the arrangement of Clarkston and J.D. as to the payment for those services deferred the receipt of compensation. Petitioners argue that the all events test has been met. Petitioners in their brief rely solely on the first two prongs of the all events test, discussed infra, and make no reference to either section 404 or the economic performance requirement of section 461(h). Deductions under an accrual method of accounting are generally allowable for the taxable year in which the all events test has been met. This test is met when all events have occurred that establish the fact of the liability, the amount of the liability can be determined with reasonable accuracy, and economic performance has occurred with respect to the liability. Sec. 461(h); sec. 1.461-1(a)(2)(i), Income Tax Regs. Where a 1 Petitioners alleged in their petition that respondent had disallowed the disputed amounts “on grounds including IRC Sections 267, 404 and 461", and respondent in answer admitted this allegation. Respondent in brief has abandoned his reliance upon sec. 267 to support his determination and relies solely upon secs. 404(d) and 461.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011