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method business and must proceed on the assumption that,
excepting the contract for deed transactions, its items of income
and expense were reported using this method.
Under the accrual method, gain arising from the contracts
for deed would be reportable in the year when the right to
receive the income became fixed and the amount of the income
became reasonably determinable. Since the instruments at issue
expressly dictated price, the latter requirement regarding amount
of income is not in question here. Concerning the former element
of a fixed right to the income, we reiterate the well-established
principle that “In applying the all events test, this and other
courts have distinguished between conditions precedent, which
must occur before the right to income arises, and conditions
subsequent, the occurrence of which will terminate an existing
right to income, but the presence of which does not preclude
accrual of income.” Charles Schwab Corp. & Subs. v.
Commissioner, 107 T.C. 282, 293 (1996), affd. 161 F.3d 1231 (9th
Cir. 1998).
Here, the only circumstance in which GIA could fail to
receive the full amount of the purchase price would be a default
by the buyer. A default, however, is a condition subsequent. As
we stated regarding the similar sales contract in Clodfelter v.
Commissioner, 48 T.C. 694, 701 (1967):
the purchaser was given immediate possession; it
thereupon assumed the rights and obligations of
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