UNITED STATES OF AMERICA, PETITIONER V. GENERAL DYNAMICS
CORPORATION, ET AL.

   No. 85-1385

   In the Supreme Court of the United States

   October Term, 1985

   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Federal Circuit

   Supplemental Memorandum for the United States

   The Solicitor General, on behalf of the United States, submits this
supplemental memorandum in support of the petition pursuant to Rule
22.6 of the Rules of this Court.

   On June 3, 1986, the Court entered its decision in United States v.
Hughes Properties, Inc., No. 85-554, holding that a gambling casino
reporting its taxes under the accrual method of accounting may accrue
as a deduction the jackpot amounts shown at year-end on the face of
its progressive slot machines.  The Court reasoned that Nevada State
Gaming Commission regulations, which forbade the casino from "reducing
the indicated payoff without paying the jackpot," operated "as a
matter of state law" to fix the casino's liability (slip op. 8).
"(T)hese jackpot liabilities were definitely fixed.  A part of the
machine's intake was to be paid out, that amount was known, and only
the exact time of payment and the identity of the winner remained for
the future" (slip op. 10).

   The situation in the present case is significantly different from
that in Hughes Properties.  As we indicated in our petition (85-1385
Pet. 4-5), respondent in the instant case seeks to accrue as a
deduction "estimate(s) of its liability to employees who were assumed
to have received medical care during the last three months of 1972,
but who had not submitted claims, or whose claims had been submitted
but not approved, as of that date." Thus, the employees' submission of
claims and demonstrations of coverage -- preconditions whose
satisfaction depended upon the diligence of the affected employees, as
well as upon determinations whether the medical procedures were
covered by the health plans, whether stipulated maximum charges had
been exceeded, and whether the treatment was medically necessary --
all stood as potential bars to respondent's liability at the close of
the tax year.

   Accordingly, we do not believe that the decision in Hughes
Properties will control the outcome in the instant case, or that it
will provide the lower courts with guidance on the important question
whether taxpayers may accrue deductions for self-insurance plans based
upon estimates from prior experience.  We therefore again urge the
Court to grant plenary review in the instant case.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   JUNE 1986