Rameau A. and Phyllis A. Johnson - Page 25

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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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