-20--20-
IPL hardly enjoyed “complete dominion” over the
customer deposits entrusted to it. Rather, these
deposits were acquired subject to an express
“obligation to repay,” either at the time service was
terminated or at the time a customer established good
credit. So long as the customer fulfills his legal
obligation to make timely payments, his deposit
ultimately is to be refunded, and both the timing and
method of that refund are largely within the control of
the customer. [Id. at 209.]
The Supreme Court’s reasoning does not support petitioners’
position. Under the terms of the 1982 MOA, the Raiders, the
borrower, controlled whether or not repayment of the $6.7 million
would be triggered. In contrast, in Commissioner v. Indianapolis
Power & Light Co., supra, the customer, i.e., the lender,
controlled whether or not the deposit was returned by making
timely payments of the utility bills. The Raiders, unlike the
power company, were not subject to an express obligation to repay
within the lender’s control.
The Raiders had the discretion to determine if and when the
suites would be constructed, as demonstrated by the terms of the
1982 MOA and the 1984 lease. Although both documents limited the
Raiders’ discretion by a standard of reasonableness, the
agreements gave the Raiders great latitude in the timing of
construction.
Where the performance of a party’s obligations under a
contract is subject to such party’s unlimited discretion, the
duties ostensibly imposed upon that party are illusory for income
tax purposes. See Schulz v. Commissioner, 686 F.2d 490, 494 (7th
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011