Daniel E. and Karen A. Harkins - Page 13

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          payments constituted refundable deposits not subject to inclusion           
          in income versus advance payments subject to accrual.  As to                
          petitioners' argument that the theater company did not have                 
          complete dominion over the payments made in 1996 until sometime             
          in 1997, the test of whether a taxpayer has “complete dominion”             
          over payments centers on “whether the taxpayer has some guarantee           
          that he will be allowed to keep the money.”  Id. at 210.  Indeed,           
          the Supreme Court remarked that the “individual who makes an                
          advance payment retains no right to insist upon the return of the           
          funds; so long as the recipient fulfills the terms of the                   
          bargain, the money is its to keep.”  Id. at 212.  In evaluating             
          whether a taxpayer enjoys complete dominion, we look to “the                
          parties' rights and obligations at the time the payments are                
          made.”  Id. at 211.                                                         
               Petitioners ignore that when the 1996 payments for the flex            
          and marketing funds were made, the theater company, under the               
          agreement, had in essence a guaranty that it could retain the               
          funds as long as it performed according to the agreement.  For              
          purposes of the accrual method, the theater company's right to              
          the flex and marketing funds was not contingent on Pepsi's                  
          investigating the theater company's compliance with the agreement           
          or approving the funds.  Therefore, the theater company's                   
          obligation (if any) to repay the funds as a result of not                   
          performing according to the agreement did not convert the funds             

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