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customers' demonstrations of acceptable credit. The Supreme
Court held that the utility customers' deposits were not advance
payments, since the customers were under no obligation to
purchase goods or services, and the customers' behavior
controlled the amounts of the refunds. Therefore, the customers'
deposits were not taxable income.
Similarly, in Oak Industries, Inc. v. Commissioner, supra,
the deposits were intended as offsets to any unpaid fees, damages
to equipment, or any other costs to the taxpayer due to a
customer's breach. The customer who performed according to his
or her obligations had a right to a refund of the deposit. These
deposits were not taxable income to the taxpayer.
In the instant case, the residents of the apartments and the
lodge, if they decided to move out of their units, had a right to
a refund of a portion of their entry fees in accordance with the
schedules stated in their respective rental contracts. The
refunds were within the residents' control, and petitioner had
"no unfettered 'dominion' over the money at the time of receipt".
At the time the entry fees were paid, the only amounts petitioner
was guaranteed to be allowed to keep were the nonrefundable
portions. Thus, we hold that the refundable portions were not
advance payments for services or prepaid rent.14 As a result,
14 The parties submitted expert reports that purported to
show the fair market rental value of the units. Neither expert
was called to testify, the parties having represented to the
Court that their experts had met and reached agreement as to the
fair market rental value of the units. A joint exhibit embodying
their joint conclusions was prepared and filed with the Court at
the conclusion of the trial. That joint exhibit is neither clear
(continued...)
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