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an obligation on Arkla to purchase any minimum quantity of
gas from Malibu.
According to petitioners, the effect of the Settlement
Agreement is to give “Arkla the option either to seek
repayment by delivery of gas in kind or to forego recoup-
ment and await repayment in cash upon depletion of the
Contract Wells.” Petitioners argue that the Settlement
Agreement “effected the creation of a loan in its
traditional sense”. In support of this argument,
petitioners cite the opinion of the Supreme Court in
Commissioner v. Indianapolis Power & Light Co., 493 U.S.
203 (1990), and the opinions of this Court and its
predecessor in Arlen v. Commissioner, 48 T.C. 640 (1967);
Veenstra & DeHaan Coal Co. v. Commissioner, 11 T.C. 964
(1948); and Summit Coal Co. v. Commissioner, 18 B.T.A. 983
(1930). Petitioners also argue that the Settlement
Agreement is “a contingent and executory contract” and that
Malibu has no right to keep the settlement payment made
thereunder until the condition set forth therein is
satisfied; i.e., until, and to the extent, Arkla recoups
the advance payment by purchasing gas under the contract.
Respondent argues that in form and in substance the
subject payment is not a loan but is a prepayment for
natural gas. Respondent notes that the Settlement
Agreement itself describes the payment as a “prepayment in
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