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to the Dealerships until applied to future purchases of repairs
or released to the Dealerships without restriction upon
expiration of the contract.
In Indianapolis Power & Light the issue was whether an
accrual method public utility was required to include in gross
income upon receipt the amount of refundable security deposits
that it required from customers with suspect credit. The amount
of the deposit was twice the customer's estimated monthly utility
bill. A customer could obtain a full refund of his deposit by
demonstrating acceptable credit or by making timely payments over
a specified period. The customer could choose to receive the
refund in cash or have it applied against future bills. The
Court held that the customer deposits were not advance payments
for electricity and therefore not taxable upon receipt. "The
key", said the Court, "is whether the taxpayer has some guarantee
that he will be allowed to keep the money." Id. at 210. In the
case of a nonrefundable advance payment, exemplified by the fees
for dancing lessons at issue in Schlude v. Commissioner, 372 U.S.
128 (1963), and subscription fees in American Auto. Association
v. United States, 367 U.S. 687 (1961),
the seller is assured that, so long as it fulfills its
contractual obligation, the money is its to keep.
Here, in contrast, a customer submitting a deposit made
no commitment to purchase a specified quantity of
electricity, or indeed to purchase any electricity at
all. IPL's right to keep the money depends upon the
customer's purchase of electricity, and upon his later
decision to have the deposit applied to future bills,
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