- 39 -
had the ability to control the repayment. Id. at 197.
Accordingly, we held "the Raiders' dominion and control
over the funds at the time they received them was
sufficient to require their inclusion in the Raiders' gross
income." Id.
The distinction between a loan and an advance payment
turns upon the nature of the rights and obligations that
the payor and recipient assume when the payment is made.
Commissioner v. Indianapolis Power & Light Co., supra at
209; Highland Farms, Inc. v. Commissioner, supra at ___,
(slip op. at 24-25); Oak Industries, Inc. v. Commissioner,
supra at 568. Accordingly, in this case we must analyze
the terms of the settlement under which Arkla made the
subject payment of $1,850,000 to Malibu.
At the outset, we note that the parties to the
settlement did not terminate the Contract as part of the
settlement, nor did they amend section 9 of the Contract
which includes the so-called take or pay provisions under
which the dispute arose. Therefore, Malibu's share of the
natural gas produced from "all Contract Wells" remained
committed for sale to Arkla under the Contract. Similarly,
Arkla remained obligated under section 9 of the Contract to
take a minimum volume of gas on an annual basis or to pay
Malibu for a volume of gas "equal to the difference between
the volume actually received during the Contract Year and
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