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Boylston (D) was engaged in the management of real estate it owned. From time to time it purchased fire and other insurance policies covering periods of more than three years. Its books and records are kept on a cash receipts and disbursement basis. D, since 1915, has deducted each year as insurance expenses the amount of insurance premiums applicable to carrying insurance for that year regardless of when the premium for that year was paid. D took a deduction in the year in question of the prorated amount of insurance, but the IRS assessed deficiencies and allowed only the actual cash payments made in those years instead of the prorated amounts.

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