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Indianapolis Power & Light did not purport to overrule these
authorities and establish refundability as the exclusive
criterion for distinguishing taxable sales income from nontaxable
deposits in all cases. Continental Ill. Corp. v. Commissioner,
998 F.2d 513 (7th Cir. 1993), affg. on this issue T.C. Memo.
1989-636. What distinguished the nontaxable deposits in the
Indianapolis Power & Light line of cases from taxable income was
not their refundability per se; ultimately the classification of
these amounts as nontaxable deposits turned on the fact that the
taxpayer's right to retain them was contingent upon the
customer's future decisions to purchase services and have the
deposits applied to the bill. Commissioner v. Indianapolis Power
& Light, 493 U.S. at 210-212; Oak Indus., Inc. v. Commissioner,
96 T.C. at 571-572, 574-575; Buchner v. Commissioner, T.C. Memo.
1990-417. The payments at issue in the cases at hand do not
share this characteristic.
To see why this is true, assume that a Dealership sells 500
VSC's, all contract holders elect to receive coverage until their
contracts expire, and they file claims with the Dealership for
covered repairs that fully consume the reserves in the
Dealership's PLRF account. On these facts, all amounts deposited
into the account will be recovered by the Dealership. Now assume
that the facts are the same except that no claims are filed.
Upon expiration of the contracts, all amounts deposited into the
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