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"Generally speaking, the practical interpretation of a
contract by the parties to it for any considerable period of time
before it comes to be the subject of controversy is deemed of
great, if not controlling, influence." Old Colony Trust Co. v.
City of Omaha, 230 U.S. 100, 118 (1913). That principle has been
applied in tax controversies involving one of the parties to the
contract. See W.S. Badcock Corp. v. Commissioner, 491 F.2d 1226,
1230 (5th Cir. 1974), revg. 59 T.C. 272 (1972)7: “We * * * look
to that most reliable indicator of what the contracting parties
meant: what they did." See also Diehl v. Commissioner, 1 T.C.
139, 144 (1942), affd. 142 F.2d 449 (6th Cir. 1944), and Connally
v. Commissioner, T.C. Memo. 1961-312, both of which cite with
approval the admonition of the Supreme Court in Insurance Co. v.
Dutcher, 95 U.S. 269, 273 (1877): "There is no surer way to find
out what the parties meant, than to see what they have done."
7 We note that the reversals of this Court in W.S. Badcock
Corp. v. Commissioner, 491 F.2d 1226 (6th Cir. 1974), revg. 59
T.C. 272 (1972), and in two cases cited infra, Ohmer Register Co.
v. Commissioner, 131 F.2d 682 (6th Cir. 1942), revg. a Memorandum
Opinion of this Court, and Central Cuba Sugar Co. v.
Commissioner, 198 F.2d 214 (2d Cir. 1952), affg. in part and
revg. in part 16 T.C. 882 (1951), were not based upon any
disagreement by this Court with the legal principles for which
those cases are cited herein. Rather, the reversals were based
upon the appellate courts’ rejection of our factual finding, in
each case, that the employees had not earned, and the taxpayer
did not owe, any sales commissions until a year subsequent to the
year of sale; i.e., there was disagreement whether the payment
contingency was a condition precedent or a condition subsequent
to a fixed commission obligation. See the discussion of this
distinction, infra.
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