Affiliated Foods, Inc. - Page 19

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          were accounted for separately on the company's books, but were              
          not placed in a separate bank account.                                      
               In Seven-Up Co., the Commissioner contended that the excess            
          of the amounts received by 7-Up over the advertising expenses               
          incurred and paid constituted taxable income.  In holding that              
          the excess was not taxable, we stated:                                      
               The payments made by the participating bottlers were not for           
               services rendered or to be rendered by petitioner.  Neither            
               were they part of the purchase price of the extract.  They             
               did not, therefore, constitute earnings received by                    
               petitioner under a claim of right and without restriction as           
               to disposition, which petitioner would have had to include             
               in its gross income under the rule laid down in North                  
               American Oil Consolidated v. Burnet, 286 U.S. 417.  While              
               petitioner had the right to receive the bottlers'                      
               contributions under its agreements with them, all the facts            
               and circumstances surrounding the transaction clearly                  
               indicate that it was the intention of all of the parties               
               concerned that these contributions were to be used to                  
               acquire national advertising for the 7-Up bottled beverage             
               and for that purpose only, and that petitioner was to be a             
               conduit for passing on the funds contributed to the                    
               advertising agency which was to arrange for and supply the             
               national advertising. * * * Although the funds were not all            
               expended in the year received, for reasons set forth in our            
               findings, petitioner did expend them for national                      
               advertising, did not use them for general corporate                    
               purposes, treated the amounts on hand in the fund on its               
               books as a liability to the bottlers, and considered itself,           
               as evidenced by its letter of May 2, 1944, to one of the               
               participating bottlers, merely as a trustee, handling the              
               bottlers' money.  [Seven-Up Co. v. Commissioner, 14 T.C. at            
               977-978.]                                                              
               In Ford Dealers Advertising Fund, Inc. v. Commissioner,                
          supra, the taxpayer received funds from franchised Ford Dealers             
          in the Jacksonville, Florida, area to be expended for advertising           
          and promotion.  The advertising fund also operated a "car-locator           

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