PRECEDENTIAL 

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 14-3961

____________

GIANT EAGLE, INC.,

Appellant

v.

COMMISSIONER OF INTERNAL REVENUE

On Appeal from the United States Tax Court

(D. C. Civil Action No. 11910-12)

Tax Court Judge: Honorable Harry A. Haines

Argued on April 29, 2015

Before: FISHER, HARDIMAN and ROTH, Circuit Judges

(Opinion filed: May 6, 2016)
2

Robert M. Barnes, Esquire (Argued)

Richard I. Halpern, Esquire

Marcus & Shapira

301 Grant Street

One Oxford Centre, 35th Floor

Pittsburgh, PA 15219

Counsel for Appellant

Julie C. Avetta, Esquire (Argued)

Jonathan S. Cohen, Esquire

Bethany B. Hauser, Esquire

Gilbert S. Rothenberg, Esquire

United States Department of Justice

Tax Division

950 Pennsylvania Avenue, N.W.

P.O. Box 502

Washington, DC 20044

Counsel for Appellee 

O P I N I O N 

ROTH, Circuit Judge:
3

Benjamin Franklin opined that “in this world nothing 

can be said to be certain, except death and taxes.”1 But the 

advent of the “all events” test renders Franklin’s 

pronouncement at best partially correct.

The Tax Code does not limit the availability of

deductions to expenses for which payment is certain. Rather, 

accrual method taxpayers are expressly permitted to deduct 

expenses before they are paid, so long as “all events have 

occurred which determine the fact of liability and the amount 

of such liability can be determined with reasonable 

accuracy.”2 A codified legal fiction affords taxpayers even 

greater flexibility in the realm of recurring expenses, for 

which an anticipated liability may be deemed “incurred” even 

if the predicate costs are not themselves incurred during the

year a deduction is claimed.

3

Here, by disallowing deductions claimed by a 

supermarket chain based on rewards shoppers had earned but 

not yet redeemed, the Tax Court misapplied the “all events” 

test as it applies to recurring expenses. For that reason, we 

will reverse and remand this case to the Tax Court with 

instructions to grant judgment in favor of Giant Eagle, Inc., 

and its subsidiaries (collectively, Giant Eagle) on the basis 

that the claimed deductions are permissible under the “all 

events” test.

I.

 

1 Letter from Benjamin Franklin to Jean Baptiste Le Roy (Nov. 13, 

1789), in 10 The Writings of Benjamin Franklin 69 (Albert Henry Smith 

ed. 1907).

2 26 U.S.C. § 461(h)(4).

3

Id. § 461(h)(3)(A).
4

Giant Eagle operates a chain of retail supermarkets, 

pharmacies, gas stations, and convenience stores in the 

Northeastern and Midwestern United States. Giant Eagle

uses the accrual method of accounting to determine and report

its income tax liability.4

A.

Giant Eagle’s fuel rewards program traces its origins 

to the supermarket chain’s introduction in 1991 of a 

customer-loyalty program called Advantage Cards. Initially, 

customers who presented an Advantage Card at checkout 

received discounts on promotion items and/or entire 

purchases. Then, in response to skyrocketing gasoline prices 

in the late 1990s and early 2000s, Giant Eagle opened

gasoline stations on the premises of many of its supermarkets, 

where Advantage Cardholders received discounts on the 

purchase of gasoline, ranging from three to seven cents per

gallon. However, Giant Eagle incurred significant losses on 

its first few years of gasoline sales, and the fuel discounts 

failed to increase supermarket traffic.

In April 2004, Giant Eagle revised the Advantage Card

program. The new program, called “fuelperks!”, linked

customers’ rewards at the pump to prior grocery purchases, 

i.e., for every $50 spent on qualifying groceries, an

Advantage Cardholder earned a ten cents-per-gallon discount 

on gas. A brochure distributed to customers set out the 

program’s ground rules, including that “discounts expire on 

the last day of the month, 3 months after they are earned,” 

 

4 Giant Eagle, Inc., a Pennsylvania corporation, filed a consolidated 

income tax return accounting for its subsidiaries’ revenue and liabilities 

during each tax year at issue.
5

and that “[t]he promotion is valid for a limited time only and 

may end at any time without prior notice.” Giant Eagle did 

not in fact end the promotion or revoke any accumulated 

discounts in 2006 or 2007, the tax years at issue. Moreover, 

fuelperks! led to a dramatic increase in Giant Eagle’s 

supermarket sales.

B.

On its 2006 and 2007 corporate income tax returns,

Giant Eagle claimed a deduction for the discounts its 

customers had accumulated but, at year’s end, had not yet 

applied to fuel purchases. Giant Eagle computed the 

deduction by (1) ascertaining the total dollar amount spent at 

its supermarkets on discount-qualifying items, (2) dividing 

that figure by 50 to determine the number of outstanding 

accumulated discounts, and (3) multiplying the quotient by 

$.10 to determine the face value of the discounts. Next, Giant 

Eagle (4) multiplied the discounts’ face value by the historical 

redemption rate of discounts in their expiring month, and 

(5) multiplied that product by the average number of gallons 

purchased in a discounted fuel sale.

From the outset of the fuelperks! program, Giant Eagle 

tracked customers’ redemption of accumulated discounts and 

used the historical averages to determine the amount of the 

claimed deductions. Thus, it did not base its computations of 

(4) and (5) on the number of discounts actually redeemed or 

the number of gallons of gasoline actually sold in the three 

months after year’s end. The Commissioner of Internal 

Revenue disallowed the deductions for the 2006 and 2007 tax 

years, which totaled $3,358,226 and $313,490, respectively.

C.
6

Giant Eagle petitioned the U.S. Tax Court for 

redetermination of its 2006 and 2007 income tax liabilities on 

two grounds. First, it argued that the discounts accumulated

but not applied by year’s end satisfied the “all events” test 

because Giant Eagle’s liability became fixed upon issuance of 

the discounts. Alternatively, Giant Eagle urged that the 

accrued discounts be treated as sales-accompanying “trading 

stamps or premium coupons,” enabling it to offset the

estimated costs against gross receipts from grocery sales.5

The Tax Court rejected both arguments. It found that 

Giant Eagle’s claimed deductions did not satisfy the “all 

events” test because the purchase of gasoline functioned as a 

condition precedent to customers’ redemption of discounts 

earned at checkout. Accordingly, the court reasoned, any 

fuelperks!-related liability became fixed only after customers 

applied the accumulated discounts to a fuel purchase, which, 

in the case of the disallowed deductions, occurred after the 

end of the tax year. Additionally, the Tax Court held that the 

Treasury Regulation governing “trading stamps” did not 

apply to the discounts that Giant Eagle customers accrued 

through fuelperks! because the gasoline discounts were not 

redeemable in “merchandise, cash, or other property,” as 

required under a 1978 revenue ruling.6 For these reasons, the 

Tax Court sustained the Commissioner’s deficiency 

determinations for both tax years. 

Giant Eagle appealed.

 

5 See Treas. Reg. § 1.451-4(a)(1).

6 See Rev. Rul. 78-212, 1978-1 C.B. 139.
7

II.7

The “all events” test derives from dictum in a 1926 

Supreme Court decision, explaining that a liability may 

accrue even “in advance of the assessment of a tax” if “all the 

events [] occur which fix the amount of the tax and determine 

the liability of the taxpayer to pay it.”

8 The test has since 

been refined, prescribed as a Treasury Regulation, and 

eventually codified. Today, 26 U.S.C. § 461 and its 

implementing regulations limit accrual method taxpayers’

deductibility of liabilities as follows:

Under an accrual method of accounting, a 

liability . . . is incurred, and generally is taken 

into account for Federal income tax purposes, in 

the taxable year in which all the 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.9

The Treasury Secretary prescribed a supplementary 

regulation defining “economic performance” in the context of 

rebates and refunds:

 

7 The Tax Court had jurisdiction over Giant Eagle’s petition pursuant to 

26 U.S.C. §§ 6213(a), 6214(a), and 7442. We exercise exclusive 

appellate jurisdiction under 26 U.S.C. § 7482(a)(1). We review de novo

whether a taxpayer has satisfied the “all events” test, see In re Harvard 

Indus., 568 F.3d 444, 450 (3d Cir. 2009), but we review the Tax Court’s

factual findings for clear error, see Historic Boardwalk Hall, LLC v. 

Comm’r, 694 F.3d 425, 447 n.48 (3d Cir. 2012).

8 United States v. Anderson, 269 U.S. 422, 441 (1926).

9 Treas. Reg. § 1.461-1(a)(2)(i).
8

If the liability of a taxpayer is to pay a rebate, 

refund, or similar payment to another person 

(whether paid in property, money, or as a 

reduction in the price of goods or services to be 

provided in the future by the taxpayer), 

economic performance occurs as payment is 

made to the person to which the liability is 

owed.10

Nonetheless, “certain recurring items” are subject to a

more relaxed version of the “all events” test:

Notwithstanding [the general rule that “the all 

events test shall not be treated as met any earlier 

than when economic performance with respect 

to such item occurs”]11 an item shall be treated 

as incurred during any taxable year if—

(i) the all events test with respect to such 

item is met during such taxable year 

(determined without regard to [26 U.S.C. 

§ 461(h)(1)]),

(ii) economic performance with respect 

to such item occurs within the shorter 

of—

 

10 Id. § 1.461-4(g)(3).

11 26 U.S.C. § 461(h)(1).
9

(I) a reasonable period after the 

close of such taxable year,12 or

(II) 8 1⁄2 months after the close of 

such taxable year,

(iii) such item is recurring in nature and 

the taxpayer consistently treats items of 

such kind as incurred in the taxable year 

in which the requirements of clause (i) 

are met, and

(iv) either—

(I) such item is not a material 

item, or

(II) the accrual of such item in the 

taxable year in which the 

requirements of clause (i) are met 

results in a more proper match 

against income than accruing such 

item in the taxable year in which 

economic performance occurs.13

For purposes of the “recurring item” exception, “the all 

events test is met with respect to any item if all events have 

occurred which determine the fact of liability and the amount 

 

12 A Treasury Regulation defines a “reasonable period” as “[t]he date the 

taxpayer files a timely (including extensions) return for that taxable 

year.” Treas. Reg. § 1.461-5(b)(1)(ii)(A).

13 26 U.S.C. § 461(h)(3)(A).
10

of such liability can be determined with reasonable 

accuracy.”

14

The Commissioner does not contest that fuelperks!

rewards qualify as both “a rebate, refund, or similar payment” 

and a “recurring expense” subject to the less onerous 

“economic performance” requirement. Moreover, the 

Commissioner concedes that Giant Eagle calculated its 

anticipated fuelperks!-related liability “with reasonable 

accuracy,” and that economic performance had occurred by 

the time of Giant Eagle’s tax filing. Thus, the only issue on 

appeal is whether “the fact of liability” was fixed at year’s 

end15-- that is, before the end of the tax year, had Giant Eagle 

become liable to pay the fuelperks! 10-cent discount to its 

customers who had purchased qualifying groceries with their 

Advantage Cards.

A.

Two seminal Supreme Court decisions frame our 

discussion of the “all events” test’s fixed liability 

requirement. In its first decision applying the “all events” test

after its codification, the Court held, in United States v. 

Hughes Properties, Inc., that a casino operator was entitled to 

deduct the annual increase in its progressive jackpot payoff 

amounts, including for jackpots not won by year’s end.16 

While the Court acknowledged that there remained an 

 

14 Id. § 461(h)(4).

15 Notably, the “matching requirement” contained in 26 U.S.C. § 

461(h)(3)(A)(iv)(II) is “deemed satisfied . . . [i]n the case of a liability 

described in [Treasury Regulation § 1.461-4](g)(3) (rebates and 

refunds).” Treas. Reg. § 1.461-5(b)(5)(ii).

16 476 U.S. 593, 601-02 (1986).
11

“extremely remote and speculative possibility [] that the 

jackpot might never be won,” it nonetheless concluded that 

the anticipated liability was “fixed” under Nevada law, which 

“forbade reducing the indicated payoff without paying the 

jackpot.”17

One year later, in United States v. General Dynamics 

Corp., the Court disallowed deductions claimed by a 

commercial taxpayer on the basis of its obligation to 

reimburse employees for medical expenses incurred by year’s 

end, but not yet submitted for reimbursement on an official 

claim form.18 The Court reasoned that because the taxpayer 

was “liable to pay for covered medical services only if 

properly documented claims forms were filed,” “[t]he filing 

of the claim [was] thus a true condition precedent to liability 

on the part of the taxpayer.”19 Though decided one year 

earlier, Hughes Properties expressly survives General 

Dynamics. Whereas the casino operator in Hughes Properties

“could not escape” its “fixed liability for the jackpot . . . as a 

matter of state law,”20 the General Dynamics Court 

emphasized that employees’ “[m]ere receipt of services . . . 

does not, in our judgment, constitute the last link in the chain 

of events creating [employer] liability.”

21

 

17 Id. at 601.

18 481 U.S. 239, 243-45 (1987).

19 Id. at 243-44 & n.5 (“[A] taxpayer may not deduct a liability that is 

contingent or contested. Nor may a taxpayer deduct an estimate of an 

anticipated expense, no matter how statistically certain, if it is based on 

events that have not occurred by the close of the taxable year.” (internal 

citations omitted)).

20 476 U.S. at 601-02.

21 Gen. Dynamics, 481 U.S. at 244-45; but see id. at 249 (O’Connor, J., 

dissenting) (“In my view, the circumstances of this case differ little from 

those in Hughes Properties.”)
12

Two of our sister circuit courts of appeals have

helpfully construed these ostensibly discordant decisions.

Most recently, in Massachusetts Mutual Life Insurance Co. v. 

United States, the Federal Circuit Court of Appeals held that a 

life insurance company was entitled to claim deductions on 

the basis of future policyholder dividends, guaranteed by the 

company’s board of directors.

22

 The court explained that

under Hughes Properties, the dividends constituted a fixed 

liability as of the board’s adoption of resolutions guaranteeing

their payment, despite ensuing uncertainty as to which 

policyholders were entitled to the payments and the amount 

each policyholder would receive.23 In the court’s view, 

General Dynamics did not disturb Hughes Properties’ 

holding that a liability may be fixed in fact without being 

fixed as to the amount or date of payment; instead, the later 

decision merely precluded characterization of anticipated 

liabilities as “fixed” if “subject to some event that must occur 

for a liability to become due.”24 Because boardroom 

resolutions conclusively established the fact of the life 

insurance provider’s liability for future dividends, the court

held that the anticipated liabilities were not subject to a 

condition precedent and therefore qualified as deductible 

expenses under the “all events” test.25

 

22 782 F.3d 1354, 1364-65 (Fed. Cir. 2015).

23 See id. at 1365 (“[N]ot knowing the ultimate recipient of the payment 

does not prevent a liability from becoming fixed.” (citing, inter alia, 

Hughes Props., 476 U.S. at 601)).

24 Id. (citing Gen. Dynamics, 481 U.S. at 244).

25 See id. at 1365, 1371. The Federal Circuit distinguished a 

recent Second Circuit decision, N.Y. Life Ins. Co. v. United 

States, 724 F.3d 256 (2d Cir. 2013), disallowing policyholder 

dividend deductions on the ground that in that case payment 
13

The Ninth Circuit Court of Appeals also ruled on the 

issue of the “all events” test in Gold Coast Hotel & Casino v. 

United States.

26 Relying on Hughes Properties’

acknowledgment of an “extremely remote and speculative 

possibility” that the deductible anticipated liability would 

never be paid, the court announced that, “for purposes of the 

‘all events’ test, what is critical is the existence of an absolute 

liability, not an absolute certainty the liability will be 

discharged by payment.”27 Thus, the court allowed a casino 

to deduct the value of its gamblers’ accumulated but as-yetunredeemed “slot club” rewards points, despite the high

likelihood that some of the points accounted for as deductions

would never be redeemed.28 Unlike the filing of a claim 

form, gamblers’ demand for payment was considered a mere 

technicality which did not involve third parties or require 

“proof of their right to payment,” and therefore did not 

constitute “a condition precedent to fixing Gold Coast’s 

liability for the value of accumulated slot club points.”29

Our sister courts’ approaches are consistent with our 

only reported decision on the subject. In Lukens Steel Co. v. 

 

of the dividends was subject to various conditions precedent. See Mass. 

Mut., 782 F.3d at 1364. Unlike the ironclad payment guarantees 

resolved by the life insurance provider’s board of directors in 

Massachusetts Mutual, id. at 1365, the annual dividends credited to 

policyholders’ accounts in New York Life would not be paid out until the 

policies’ anniversary date, and only then if policyholders remained 

current on all premium payments, 724 F.3d at 258-59, 263-64.

26 158 F.3d 484 (9th Cir. 1998).

27 Id. at 489.

28 See id. at 490-91 (“[T]he data in the record suggests that only 69% of 

slot club points are actually redeemed.”).

29 See id. at 490 (distinguishing Gen. Dynamics, 481 U.S. at 244).
14

Commissioner, a case that predated codification of the “all 

events” test, we held that an accrual method taxpayer was 

entitled to deduct payments credited to a “contingent liability 

account,” even though they “would not be paid out 

immediately or at a specified time.”30 Critically, however,

under the terms of a collective bargaining agreement, “[i]t 

was not possible for Lukens to cancel the contingent liability 

account without paying” the credited amounts.31 Because the 

taxpayer irrevocably committed to the payments during the 

tax year at issue, it was entitled to deduct corresponding

future liabilities that “would be paid in a reasonable period of 

time.”

32

B.

As in Lukens Steel, here we determine whether the 

taxpayer’s anticipated liability was fixed at year’s end with 

reference to contract law principles.

33

 Specifically, Giant 

 

30 442 F.2d 1131, 1134-35 (3d Cir. 1971) (“In similar situations it has 

been held that indeterminancy as to the time or amount of payment does 

not destroy the deductibility of an accrued item when the amount of 

liability is absolutely fixed.” (citations omitted)).

31 Id. at 1134.

32 Id. at 1135; accord Wash. Post Co. v. United States, 405 F.2d 1279, 

1284 (Ct. Cl. 1969) (“[W]hen a group liability is involved, it is the 

certainty of the liability which is of the utmost importance in the all 

events test, and not necessarily either the certainty of the time over which 

payment will be made or the identity of the payees.” (internal quotation 

marks omitted)).

33 Accord Rev. Rul. 98-39, 1998-2 C.B. 198 (“Where a taxpayer’s 

obligations are set forth in a written agreement, the terms of the 

agreement are relevant in determining the events that fix the taxpayer’s 

obligation to pay.”). To be sure, noncontractual obligations such as those 

contained in a statute or regulation may serve an analogous function, see 

Hughes Props., 476 U.S. at 596 (Nevada Gaming Commission 
15

Eagle characterizes its issuance of fuelperks! rewards as a 

unilateral contract formed at checkout, which conferred

instant liability on the supermarket chain to its customers for

the rewards they accrued.

Unlike bilateral contracts, which are premised on 

reciprocal promises, “unilateral contracts . . . involve only one 

promise and are formed when one party makes a promise in 

exchange for the other party’s act or performance. 

Significantly, a unilateral contract is not formed and is, thus, 

unenforceable until such time as the offeree completes 

performance.”34 A unilateral contract also differs from an 

unenforceable contingent gift in that a reasonable person 

would understand that she could accept the offer and reap the 

promised reward simply by performing the task specified.35 

Thus, a Pennsylvania court held that a car dealership,

advertising a discount on a future car purchase if a hole-inone was made on the ninth hole of a local golf course, was 

obligated to honor its “offer” when a golfer finally aced the 

hole—despite the dealership’s stated intention to end the 

promotion two days earlier.36 The court reasoned, “[i]t is the 

manifested intent of the offeror and not his subjective intent 

which determines the persons having the power to accept the 

offer.”37 Because “the offeror’s manifested intent, as it 

 

regulation); Gold Coast Hotel, 158 F.3d at 488 & n.6 (same), but the “all 

events” test does not require that liabilities be fixed by such external 

sources.

34 First Home Sav. Bank, FSB v. Nernberg, 648 A.2d 9, 14 (Pa. Super. 

Ct. 1994) (internal citations omitted).

35 See Cobaugh v. Klick-Lewis, Inc., 561 A.2d 1248, 1249-50 (Pa. Super. 

Ct. 1989); see also Pacitti v. Macy’s, 193 F.3d 766, 774-75 (3d Cir. 

1999).

36 Cobaugh, 561 A.2d at 1250.

37 Id. at 1251 (citing Restatement (Second) of Contracts § 29 (1981)).
16

appeared from signs posted at the ninth tee, was that a holein-one would win the car,” the dealer was liable in accordance 

with such reasonable expectations.38

So too might a Giant Eagle customer have reasonably

presumed the redeemability of accumulated fuelperks!

rewards, as provided by the well-publicized “Simple Program 

Guide”:

 

38 Id.
17

The brochure distributed to Advantage Cardholders also 

included fine print providing, inter alia, that “discounted fuel 

cannot exceed 30 gallons and discounts must be used in full 

on one vehicle in one transaction”; “[t]he promotion is valid 

for a limited time and may end at any time without prior 

notice”; and “fuelperks! discounts expire 3 months after the 

last day of the month in which they’re earned.” But none of 

the published program parameters suggested that Giant Eagle 

reserved the right to retract rewards that customers had 

already accrued. Indeed, in the entire history of Giant Eagle’s 

fuel rewards program, “[n]o such retroactive termination ever 

occurred, or was even contemplated.”39

Like the golfer who teed off with a promise of reward 

in mind, a customer anticipated the promised fuel discounts 

when deciding to shop at Giant Eagle in the first place – and 

thus deciding not to shop at a different store. Because she

was then aware that she could apply the discounts as 

advertised if she spent fifty dollars on supermarket purchases 

using her Advantage Card, she was indeed a party to a 

unilateral contract with Giant Eagle. Liability therefore

attached upon her performance, i.e., at checkout.

For purposes of the “all events” test’s fixed liability 

prong, it is irrelevant that neither the total amount of Giant 

Eagle’s anticipated liability nor the identity of all the 

 

39 See Hughes Props., 476 U.S. at 604-05 (“None of the components that 

make up this parade of horribles, of course, took place here.”). Nor 

could Giant Eagle have terminated the rewards retroactively “without an 

explicit reservation of the power to do so.” Abbott v. Schnader, 

Harrison, Segal & Lewis, LLP, 805 A.2d 547, 558-60 (Pa. Super. Ct. 

2002); see Kemmerer v. ICI Americas Inc., 70 F.3d 281, 287 (3d Cir. 

1995).
18

customers who eventually applied discounts toward gasoline 

purchases could be conclusively identified at year’s end.40 

And while there remained an “extremely remote and 

speculative possibility” that the amount of Giant Eagle’s 

claimed deductions would overstate the value of the rewards 

its customers ultimately redeemed,

41 Giant Eagle significantly

mitigated that risk by tracking its customers’ monthly

redemption rates and offsetting the deductions accordingly to 

account for prospective non-redeemers. Giant Eagle amply 

demonstrated the existence—as of year’s end—of both an 

absolute liability and a near-certainty that the liability would

soon be discharged by payment. The chance of nonredemption had been calculated by Giant Eagle “with 

reasonable accuracy” as conceded by the Commissioner. The 

“all events” test demands no more. We hold, therefore, that

following Hughes Props. and Lukens Steel, Giant Eagle was 

entitled to deduct fuelperks!-related liabilities incurred during 

the tax years at issue.

III.

By disallowing deductions claimed on the basis of 

established recurring expenses, the Tax Court effectively 

obliterated the distinction between two accounting methods

expressly authorized by the Tax Code.

42

 The extent to which 

 

40 See Lukens Steel, 442 F.2d at 1134-35 (“[I]ndeterminancy as to the . . . 

amount of payment does not destroy the deductibility of an accrued item 

when the amount of liability is absolutely fixed.”); Mass. Mut., 782 F.3d 

at 1365 (“[N]ot knowing the ultimate recipient of the payment does not 

prevent a liability from becoming fixed.” (citing, inter alia, Hughes 

Props., 476 U.S. at 601)).

41 See Hughes Props., 476 U.S. at 601.

42 See 26 U.S.C. § 446(c)(2). The accrual method of accounting differs 

fundamentally from its cash counterpart. Whereas businesses that 
19

cash and accrual methods of accounting sometimes yield 

different deductions is a byproduct of the Tax Code’s design. 

So long as a taxpayer consistently adheres to one accounting 

method, the Code is agnostic as to the benefit or hardship 

wrought by his selection.43

For the foregoing reasons, we will reverse the Tax 

Court’s order sustaining the Commissioner’s deficiency 

determinations and remand this case with instructions to grant 

judgment in favor of Giant Eagle on the ground that the 

claimed deductions are permissible under the “all events” test.

44

 

choose the latter method refrain from counting revenues until they are 

received and expenses until they are paid, those using the accrual method 

account for transactions when they occur, regardless of when the money, 

goods, or services actually change hands.

43 See 26 U.S.C. § 446(a), (b) (providing that the Treasury Department

may only recalculate a taxpayer’s liabilities without respect to the

accounting method regularly used in keeping his books if “no method of 

accounting has been regularly used by the taxpayer, or if the method 

used does not clearly reflect income”).

44 Because we are reversing on the basis of the Tax Court’s 

misapplication of the “all events” test, we express no opinion concerning 

the soundness of its alternative holding that the Treasury Regulation 

governing “trading stamps” is inapplicable to fuelperks! rewards 

accompanying Giant Eagle supermarket purchases. Nor do we discuss 

whether the Tax Court accorded Revenue Ruling 78-212 supererogatory 

deference. Cf. In re WorldCom, Inc., 723 F.3d 346, 357 (2d Cir. 2013); 

Kornman & Assocs., Inc. v. United States, 527 F.3d 443, 454 & n.9 (5th 

Cir. 2008); Aeroquip-Vickers, Inc. v. Comm’r, 347 F.3d 173, 181 (6th 

Cir. 2003); Omohundro v. United States, 300 F.3d 1065, 1067-68 (9th 

Cir. 2002); Del Commercial Props., Inc. v. Comm’r, 251 F.3d 210, 214 

(D.C. Cir. 2001).
1

Giant Eagle, Inc. v. Commissioner of Internal Revenue

No. 14-3961

HARDIMAN, Circuit Judge, dissenting. 

The Court reverses the Tax Court’s order after finding 

that, at the close of the 2006 and 2007 taxable years for which 

Giant Eagle deducted anticipated fuelperks! expenses, “all 

events ha[d] occurred which determine[d] the fact” that it was 

liable to pay those expenses. 26 U.S.C. § 461(h)(4). Because I 

believe Giant Eagle’s liabilities were not determined until 

fuelperks! were redeemed, I respectfully dissent. 

I

The law applicable to this case is relatively clear. An 

accrual method taxpayer need not ascertain the amount of a 

liability,

1

to whom it is owed,

2 or when it will be paid3

in 

order for events to “determine the fact” of the liability and 

render it deductible. Instead, all that is required is that it

became “fixed and absolute” in the taxable year for which the

deduction is sought.

4 United States v. Hughes Props., Inc., 

476 U.S. 593, 600 (1986) (quotation omitted); see also, e.g.,

Gold Coast Hotel & Casino v. United States, 158 F.3d 484, 

489 (9th Cir. 1998) (“[F]or purposes of the ‘all events’ test, 

what is critical is the existence of an absolute liability . . . .”

(emphasis removed)).

Several cases explain what it means for a liability to be 

fixed and absolute. In United States v. Hughes Properties,

Inc., a casino established the fact of its liability to make an 

additional slot machine payout by raising its progressive 

 

1 26 U.S.C. § 461(h)(4) (amount need only be 

“determined with reasonable accuracy”).

2 E.g., United States v. Hughes Props., Inc., 476 U.S. 

593, 602 (1986).

3 E.g., id. at 604.

4 Where a liability is fixed and absolute, neither a 

potential inability of the taxpayer to pay it (due to going out 

of business, loss of license, or bankruptcy) nor “an extremely 

remote and speculative possibility” that the liability will 

never come due negates that the liability is determined in fact. 

See Hughes Props., 476 U.S. at 601–02, 605–06.
2

jackpot under a Nevada law that prescribed “a fixed liability 

for the jackpot which it could not escape.” 476 U.S. at 602. In 

Massachusetts Mutual Life Insurance Co. v. United States, an 

insurance company determined the fact of its liability to make 

dividend payments to a class of policyholders after the board 

of directors “passed an absolute resolution to pay the 

guaranteed dividend and . . . at least some policyholders were 

already qualified recipients of that guarantee.” 782 F.3d 1354,

1365 (Fed. Cir. 2015). And in Lukens Steel Co. v. 

Commissioner of Internal Revenue, a steel company 

established the fact of its liability to transfer funds from a 

contingent liability account to its employees by paying into 

the account under a collective bargaining agreement that 

obligated funds “to be used to pay benefits to [the company’s] 

eligible employees” and specified that “[i]n no event could 

the [account] be cancelled by” the company. 442 F.2d 1131, 

1134–35 (3d Cir. 1971). In each of these cases, events took 

place under a set of rules—imposed by law or contract—that 

established that the taxpayer was liable and would remain 

liable until payment was made.

In an effort to identify rules that established Giant 

Eagle’s liability, the Majority turns to Pennsylvania’s 

common law of contracts and the terms and conditions of the 

fuelperks! program. Specifically, it applies the Pennsylvania 

Superior Court’s decision in Cobaugh v. Klick-Lewis, Inc. to 

show that Giant Eagle entered into a unilateral contract with 

each shopper at checkout, thereby incurring liability to 

provide discounted gas at that time. 561 A.2d 1248 (Pa. 

Super. Ct. 1989). The Majority notes that accrued fuelperks! 

were not expressly permitted to be, and never have been,

retracted by Giant Eagle. Based on these observations, the 

Majority concludes that “Giant Eagle amply demonstrated the 

existence—as of year’s end—of both an absolute liability and

a near-certainty that the liability would soon be discharged by 

payment.” Maj. Typescript at 16. While I agree with the 

Majority’s observations, I disagree with its conclusions. 

We have elsewhere applied Cobaugh for the 

proposition that an advertisement promising an opportunity to 

earn a benefit in exchange for performance can give rise to a 

unilateral contract. Pacitti v. Macy’s, 193 F.3d 766, 772–73 

(3d Cir. 1999) (applying Cobaugh to an offer for “the 
3

opportunity of becoming ‘Broadway’s New “Annie”’”).

Accordingly, I am constrained by precedent to agree with my 

colleagues that, under Cobaugh, Giant Eagle’s advertisements

constituted an offer to its shoppers to enter into a unilateral 

contract for the opportunity to redeem fuelperks! for 

discounted gas by purchasing $50 or more in groceries. See 

Hughes Props., 476 U.S. at 601–02 (applying state law to 

determine whether a casino’s liability was fixed). Qualifying 

purchases met the complete performance requirement and 

“[l]iability therefore attached upon . . . performance, i.e., at 

checkout.” Maj. Typescript at 15. 

Nonetheless, the liabilities that accrued to Giant Eagle 

on account of its fuelperks! program were not absolute. The 

casino in Hughes Properties, the insurance company in 

Massachusetts Mutual, and the steel company in Lukens Steel

all operated under a set of rules that offered no hope of escape 

from their fixed liabilities. In each case, those liabilities had 

to remain on their books until discharged by payment. Here, 

in contrast, Giant Eagle made each liability temporary by 

providing that “fuelperks! discounts expire 3 months after the 

last day of the month in which they’re earned.” App. 1161. If 

a shopper failed to redeem fuelperks! within that timeframe, 

the discounts were lost and Giant Eagle had no obligation to 

honor a belated attempt at redemption. After acknowledging

this fact, the Majority offers reasons why we should

nonetheless conclude that Giant Eagle faced “an absolute 

liability.” Maj. Typescript at 16. After careful consideration 

of those reasons, I remain unconvinced. 

First, the Majority emphasizes that “none of the 

published program parameters suggested that Giant Eagle 

reserved the right to retract rewards that customers had 

already accrued” and “[n]o such retroactive termination ever 

occurred, or was even contemplated.” Id. at 14–15 (quotation 

omitted). While these statements are undoubtedly true, they 

do not change the fact that the company’s liabilities were 

extinguishable by another means. Like retraction, expiration 

has the effect of eliminating liability for the benefit of Giant 

Eagle.

Second, the Majority notes that “it is irrelevant that 

neither the total amount of Giant Eagle’s anticipated liability 
4

nor the identity of all the customers who eventually applied 

discounts toward gasoline purchases could be conclusively 

identified by year’s end.” Id. at 15 (emphasis removed). In 

my view, this comment reveals an analytical error, i.e., a 

conversion of Giant Eagle’s individual liabilities into a group 

liability. In order to establish that Giant Eagle faced a fixed 

liability, the Majority applies Cobaugh to conclude that the 

company entered into a unilateral contract at checkout with—

and therefore became liable to provide discounted gas to—

each shopper. Consequently, its liabilities were several and 

fixed on an individual basis. But the Majority later departs 

from that reality by treating the company’s numerous 

individual liabilities as an amalgamation. See Maj. Typescript

at 15 (citing Lukens Steel and Massachusetts Mutual, cases 

that each involved a single group liability); see also id. at 16

(“Giant Eagle amply demonstrated the existence—as of 

year’s end—of . . . an absolute liability” (emphasis added)).

This errant tack is critical because whether liability is fixed 

on an individual or collective basis is a “significant” fact with 

the potential to “dictate . . . different outcome[s]” in our 

cases. Mass. Mut., 782 F.3d at 1364. Accordingly, I cannot 

agree with the Majority’s analysis, which perceives Giant 

Eagle’s liability as being fixed both on an individual and 

collective basis.

As I see it, the question for our resolution is whether 

Giant Eagle’s liability to any individual shopper with 

accrued-but-not-yet-redeemed fuelperks! was certain to 

continue under the rules applicable to that liability until it was 

paid. Because one of those rules allowed for the expiration of 

each shopper’s fuelperks! (and Giant Eagle’s corresponding 

liability to that shopper), the answer is plainly “no.” While 

Giant Eagle became liable to a shopper at checkout, it did not 

become absolutely liable to that shopper unless and until the 

shopper redeemed fuelperks! prior to their expiration. For that 

reason, I would hold that, at the close of the 2006 and 2007 

taxable years, Giant Eagle faced many fixed liabilities for yetto-be-redeemed fuelperks!, but none that were “determine[d] 

in fact” because each was contingent upon future redemption 

by the shopper.
5

* * *

Had Giant Eagle not included an expiration provision 

in its terms and conditions, I would be inclined to agree with 

my colleagues that the company incurred a fixed and absolute 

liability to each shopper at checkout. In that case, we would 

face the difficult task of determining whether historical 

redemption data and other evidence reveal more than “an 

extremely remote and speculative possibility” that any given 

shopper would fail to timely redeem discounts and how much 

bearing, if any, the answer to that question has on whether the 

company’s liabilities were “determine[d] in fact.” Hughes 

Props., 476 U.S. at 601; see Gold Coast Hotel & Casino, 158 

F.3d at 489 (interpreting Hughes Properties to require at least

a “reasonable expectancy” that the liability will be discharged 

by payment of cash or its equivalent). But the fact that the 

store did include an expiration provision—thereby 

conditioning its liability to each shopper upon fuelperks!

redemption at a Giant Eagle-owned gas station within 

approximately 3 months’ time—made “redemption” a

condition precedent to the establishment of an absolute 

liability. Because that event had not occurred by the close of 

the 2006 or 2007 taxable years with respect to the deductions 

Giant Eagle claimed on accrued-but-not-yet-redeemed 

fuelperks!, I would hold that the “all events” test was not 

satisfied and those anticipated expenses were not deductible.

II

In light of my view regarding Giant Eagle’s failure to 

satisfy the “all events” test, I turn to its alternative argument. 

Giant Eagle contends that its deductions were the functional 

equivalent of offsets to income permissible under a 

longstanding exception to the “all events” test. Pursuant to

Treasury Regulation § 1.451–4(a)(1), “[i]f an accrual method 

taxpayer issues trading stamps or premium coupons with

sales” that are redeemable “in merchandise, cash, or other 

property,” the taxpayer should “subtract from gross receipts” 

the estimated cost of redemption of those stamps and coupons

in calculating taxable income.

5 While it is undisputed that 

 

5

In effect, § 1.451–4(a)(1) allows a taxpayer to reduce 

its tax liability by writing off the expected future cost of such 
6

fuelperks! are “issue[d] . . . with sales” of groceries, the 

parties contest the exception’s two other requirements: (1) 

whether fuelperks! qualify as “trading stamps or premium

coupons” and (2) whether fuelperks! are redeemable “in 

merchandise, cash, or other property.” Because fuelperks! are 

not redeemable “in merchandise, cash, or other property,” I 

agree with the Tax Court and would hold that § 1.451–4(a)(1) 

does not authorize Giant Eagle’s deductions. 

In a 1978 revenue ruling, the IRS interpreted the 

phrase “in merchandise, cash, or other property” to imply an 

“unconditional” right of redemption, meaning that in order for 

a stamp or coupon to fall under § 1.451–4(a)(1) it must be

“redeemable without additional consideration from the 

consumer.” Rev. Rul. 78-212, 1978-1 C.B. 139, *2 (1978).

For that reason, the IRS advised a manufacturer that it “may 

not avail itself of [§ 1.451–4(a)(1)]” to account for the 

redemption of “coupons that entitle consumers to a discount 

on the sales price of certain products purchased in the future.” 

Id. at *1. Such coupons are not redeemable “in merchandise, 

cash, or other property” because their redemption is 

“conditioned on an additional purchase.” Id. at *2. 

In response to Revenue Ruling 78-212, Congress 

added § 466 to the Internal Revenue Code. That section 

authorized

6

taxpayers to offset revenue with respect to a 

limited class of discount coupons—i.e., those which, inter 

alia, were redeemable for “a discount on the purchase price of 

 

trading stamp and premium coupon redemption—a result the 

“all events” test otherwise precludes with its prohibition of

the deduction of contingent liabilities. See Capital One Fin. 

Corp. v. Comm’r, 133 T.C. 136, 197 (2009), aff’d sub nom.

Capital One Fin. Corp., & Subsidiaries v. Comm’r, 659 F.3d 

316 (4th Cir. 2011) (referring to § 1.451–4(a)(1) as an 

“exception” to the “all events” test and noting that “taxpayers 

are entitled to a present deduction for only that portion of the 

stamps or coupons that they expect to eventually be 

redeemed”). 

6 Section 466 was repealed 8 years later by the Tax 

Reform Act of 1986. Pub. L. No. 99-514, § 823(a), 100 Stat. 

2373.
7

merchandise or other tangible personal property.” Treas. Reg. 

§ 1.466-1(c)(1). In other words, in reconciling (1) its interest 

in the ability of companies to offset the cost of certain

discount coupons with (2) the IRS’s interpretation of § 1.451–

4(a)(1) which precluded such offsets, Congress chose not to 

broaden the IRS’s interpretation. Instead, Congress passed a 

law which independently authorized those offsets and, in 

doing so, expressly drew a distinction between redemption in

property (the nature of redemption that falls within the ambit 

of § 1.451–4(a)(1)) and redemption of a discount on the 

purchase price of property (the nature of redemption 

addressed by § 466)—a distinction it has drawn in other areas

as well. See Treas. Reg. § 1.461–4(g)(3) (explaining that a 

“rebate, refund, or similar payment” can be paid “in property, 

money, or as a reduction in the price of goods or services” 

(emphasis added)). 

As advertised, a fuelperks! reward entitled its holder to 

“10¢ off every gallon of gas on your next fill-up at GetGo.”

App. 1161. Therefore, the benefits provided by fuelperks! 

were discounts on the purchase price of gasoline, not an 

entitlement to gasoline itself or the discount’s cash value.

This is true even though fuelperks! could be accumulated and 

redeemed en masse for free gas. In those situations, shoppers 

did not exchange fuelperks! for gas as such, but rather for a 

100% discount on the price of gas—a functional equivalent to 

be sure, but reflective of an important distinction respecting 

the nature of fuelperks! redeemability. It is this nature of 

redeemability—i.e., that fuelperks! can be exchanged only for 

discounts—that leads me to conclude that fuelperks! were not 

redeemable “in merchandise, cash, or other property.” Giant 

Eagle asks us to reject this conclusion for two reasons, neither

of which I find persuasive.

First, Giant Eagle argues that “discounts against gas” 

count as “other property” within the meaning of § 1.451–

4(a)(1) and the IRS’s contrary interpretation was “mistakenly 

viewed as persuasive” by the Tax Court. Giant Eagle Br. 60. I 

disagree because the notion that the phrase “in merchandise, 

cash, or other property” categorically excludes coupons 

redeemable for discounts is supported not only by the

persuasive power of the IRS’s ruling, see, e.g., PSB Holdings, 

Inc. v. Comm’r, 129 T.C. 131, 142 (2007) (applying the 
8

deferential standard of Skidmore v. Swift & Co., 323 U.S. 

134, 140 (1944)), but also by the regulation’s text and its 

historical context. By enacting § 466, Congress responded to 

the IRS’s interpretation of § 1.451–4(a)(1) not by bringing

discount coupons within its ambit, but by giving separate 

authorization to companies to offset the cost of coupons 

redeemable for “a discount on the purchase price of 

merchandise or other tangible property.” In doing so, 

Congress hewed to, and placed textual emphasis on, the 

distinction the IRS drew: that benefits redeemable “in” 

property do not include benefits redeemable for “a discount 

on the purchase price of” property. 

Second, Giant Eagle claims that fuelperks! were 

designed to (and did) generate grocery revenue—not fuel 

revenue—and that setting off the expected cost of fuelperks!

redemption against grocery sales therefore accords with the 

purpose of § 1.451–4(a)(1), which is “to match sales revenues 

with the expenses incurred in generating those revenues.” 

Capital One Fin. Corp. v. Comm’r, 133 T.C. 136, 197 (2009).

I have no reason to doubt the company’s representations as to

the purpose of the fuelperks! program or the impact it has had 

on revenues. Accordingly, I agree with Giant Eagle that the 

Tax Court’s application of § 1.451–4(a)(1) to fuelperks! led 

to a result that is at least somewhat incongruent with one of 

the regulation’s purposes. But this incongruity is the product 

of a faithful application of the requirements of § 1.451–

4(a)(1) to the facts of this case. 

III

For the reasons stated, I would hold that the 2006 and 

2007 taxable year deductions Giant Eagle claimed on 

accrued-but-not-yet-redeemed fuelperks! neither satisfied the 

“all events” test nor qualified as offsets to income under 

§ 1.451–4(a)(1). Accordingly, I respectfully dissent.