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income when collected. Although the amount of the reserves that
the taxpayer would ultimately recover was not ascertainable at
the time of deposit, in all cases disposition of the reserves
would inure to the taxpayer's benefit, and therefore the right to
receive was fixed. See also Bolling v. Commissioner, 357 F.2d 3
(8th Cir. 1966), affg. in relevant part and revg. and remanding
on other issues T.C. Memo. 1964-143.
Respondent's position is that the cases at hand are
controlled by the Hansen line of cases. Respondent argues that
the Dealerships acquired a fixed right to receive the full
purchase price of the VSC at the time of the sale, even though
they were required by contract immediately to deposit a portion
in an escrow account. We agree.
Petitioners take the position that amounts deposited by a
Dealership in the PLRF were not includable in its gross income
unless or until actually released to the Dealership as payment
for covered repairs or, upon expiration of the VSC, as unconsumed
reserves. Petitioners reason as follows: the VSC's are
executory contracts. The issuing Dealership earned the amounts
required to be paid under their terms through performance. At
the time the VSC's were entered into, the issuing Dealership had
not earned and was not entitled to be paid any portion of the
funds required to be held in escrow. The first time the issuing
Dealership had any right to this portion of the contract holder's
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