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the next 19 years in accordance with the schedule provided to the
residents as part of the rental contract, reducing account 262
accordingly. Similarly, for Federal income tax purposes,
petitioner reported as income these same portions of the entry
fees for the apartments and the lodge as they became
nonrefundable or nonforfeitable within that tax year.
As of January 1, 1988, account 261 had a balance of
$578,038, and account 262 had a balance of $1,066,982, for a
total of $1,645,020. As of December 31, 1988, account 261 had a
balance of $628,577, and account 262 a balance of $1,131,830, for
a total of $1,760,407. Thus, during 1988, the accounts had net
increases of $50,539, and $64,848, respectively, for a total net
increase that year of $115,387.
In its books, petitioner recorded 6 percent of the cluster
home receipts as income in the year received and credited the
remaining 94 percent to an account designated as "Liability for
Repurchase". Petitioner's books treated a total of 24 percent of
the purchase price as income over a 7-year period, with
corresponding reductions in the liability account, as follows: 6
percent in year 1 and 3 percent per year in years 2 through 7.
The liability for repurchase account was never reduced below 76
percent of the original purchase price of the cluster home.
For Federal income tax purposes, petitioner did not treat
the cluster home transactions as sales. Petitioner reported the
proceeds from the cluster home transactions in accordance with
that year's reductions in petitioner's "liability for repurchase"
amounts. Petitioner also claimed depreciation deductions on the
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