- 2 -
Held: The cluster home or condominium transactions
constitute sales rather than financing arrangements so
that P must include in income the net gains on the
sales and is not entitled to depreciation deductions on
the units.
Held further: The entry fees do not constitute prepaid
rent or advance payments for services that must be
reported in the year of receipt. P's reporting of the
nonrefundable or nonforfeitable portions of the entry
fees each year clearly reflects income. Commissioner
v. Indianapolis Power & Light Co., 493 U.S. 203 (1990);
Oak Industries, Inc. v. Commissioner, 96 T.C. 559
(1991) applied.
David M. Furr and John D. Kersh, Jr., for petitioners.
James E. Gray and Paul G. Topolka, for respondent.
PARKER, Judge: Respondent determined a deficiency in
petitioners' Federal income tax in the amount of $2,531,650 and
an addition to tax under section 6661 in the amount of $632,913
for the taxable year 1988.1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable year before
the Court, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
After respondent's concession,2 the issues for decision are:
1 Respondent also determined that the deficiency meets the
definition of a large corporate underpayment under sec. 6621(c)
as in effect for determining interest for periods after Dec. 31,
1990, and, therefore, that the rate of interest on the deficiency
will be increased by 2 percent over the usual rate determined
under sec. 6621(a)(2).
2 Respondent no longer asserts an adjustment of $5,001,633
deriving from the cluster home or condominium "liabilities"; that
(continued...)
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