- 31 -
subject to forfeiture when they are credited to the taxpayer's
reserve account.
So long as a Dealership (including any successor in
interest) remains in existence until all of its VSC's have
expired, all proceeds from the sale of those contracts that it
deposits in the PLRF will, as in Hansen, either be paid to the
Dealership directly or be applied in satisfaction of its various
liabilities under the operative agreements. The problem of
prediction suggested by petitioners does not arise.
b. Petitioners' Deposit Theory
Petitioners advance two alternative theories under which the
reserves would not be reportable as income to the Dealerships in
the year they were collected from the purchaser. One theory
characterizes the reserves as customer deposits. The authority
on which they rely is the "complete dominion" test enunciated by
the Supreme Court in Commissioner v. Indianapolis Power & Light
Co., 493 U.S. 203 (1990). Although petitioners do not spell out
in detail how they think Indianapolis Power & Light applies, the
argument seems to run as follows: inasmuch as the Dealerships
collected the amounts allocable to the PLRF subject to an
obligation to refund them at the purchaser's option, the
Dealerships did not have "some guarantee that * * * [they would]
be allowed to keep the money" as long as they complied with the
terms of the contract. Accordingly, the reserves were not income
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011