Daniel E. and Karen A. Harkins - Page 11

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          subsequent, which may terminate an existing right to income but             
          the presence of which does not preclude the accrual of income.              
          See Keith v. Commissioner, 115 T.C. 605, 617 (2000); Charles                
          Schwab Corp. & Subs. v. Commissioner, 107 T.C. 282, 293 (1996),             
          affd. 161 F.3d 1231 (9th Cir. 1998).  Having stated the                     
          boundaries of the all events test, we now turn to the parties'              
          III.  The Parties' Contentions                                              
               As to the flex and marketing funds paid by Pepsi during 1996           
          (for the first half of 1996) and which the theater company                  
          reported as income on its 1996 tax return, petitioners now argue            
          that those payments were refundable deposits not subject to                 
          accrual in 1996.  Petitioners cite Commissioner v. Indianapolis             
          Power & Light Co., 493 U.S. 203 (1990), for the proposition that            
          a taxpayer does not have to accrue payments over which he does              
          not have complete dominion and that complete dominion occurs only           
          when the taxpayer has some guaranty of retaining the funds at               
          issue.  Petitioners argue that because the theater company was              
          obligated to repay the payments for the flex and marketing funds            
          in the event of a breach by the theater company occurring as late           
          as “after year end (e.g., March 1997)”, the theater company did             
          not enjoy complete dominion over the payments during 1996 and               
          therefore did not have to accrue them.  Petitioners contend that            
          the theater company enjoyed complete dominion over the funds                

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