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installment contracts as income at the time of sale
since the transfer of the property by them to their
respective purchasers established their right to be
paid. Here, in contrast, we are dealing with executory
service contracts which can be terminated at will by
the Contract Holder. At the time the VSC is entered
into, the Dealerships have only a conditional right to
receive a portion of agreed purchase price, and no
right to receive the amount required to be held in
Escrow. This fundamental difference undoes all of
Respondent's argument based on Hansen and Resale Mobile
Homes.
The distinction that petitioners draw between executory
service contracts and completed sales of property misrepresents
the issue in the dealer reserve cases and their holdings. If the
transactions at issue in those cases had simply been closed and
completed sales of property, then no portion of the purchase
price would have been withheld in reserve. The dealer reserves
were established precisely for the purpose of securing executory
obligations of the taxpayer as guarantor of future payments on
the installment paper. The cases held that the taxpayer acquired
a fixed right to receive the reserves notwithstanding the
possibility that, as guarantor of the consumer's performance, the
taxpayer would forfeit some or all of the reserves to the finance
company in the event that the consumer defaulted or paid off the
balance of the loan prematurely, terminating the installment
contract before the scheduled interest was earned.
Another problem with petitioners' argument is that it
assumes that the proper method of reporting income from the sale
of VSC's is the same as the method the Dealerships are entitled
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