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under the indemnity agreement.7 Even though National
acknowledged it was liable for at least $2,500,000 under the
indemnity agreement, respondent contends that the total amount of
National’s liability was uncertain. The total amount continued
to be in dispute because of, among other things, the District’s
demands regarding completion of the project. While it is true
that National’s total obligation with regard to the completed
construction remained uncertain at the end of 1999, that did not
alter the fact that National’s acknowledged minimum obligation to
F&D under the indemnity agreement was $2,500,000. The $2,500,000
constitutes an uncontested amount similar to the $6,000
uncontested amount described in the regulations. See sec. 1.461-
1(a)(2)(ii), Income Tax Regs. The liability is thus determinable
with reasonably accuracy to the extent of the uncontested
$2,500,000 amount.
2. Economic Performance
The all events test will not be treated as met any earlier
than when economic performance occurs. Sec. 461(h)(1). The
occurrence of economic performance depends upon the circumstances
underlying a liability or the obligations a liability creates.
See sec. 461(h)(2). In that regard, respondent argues that the
liability arose out of National’s alleged breach of the indemnity
7The parties stipulated for purposes of this case that
National recognized it had an obligation to F&D of more than
$2,500,000 under the indemnity agreement as of Dec. 31, 1999.
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