Daniel E. and Karen A. Harkins - Page 14

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          into refundable deposits or preclude their accrual as income.               
               Pursuant to Arizona's parol evidence rule and Mr. Goodson's            
          testimony, we accept petitioners' argument that Pepsi generally             
          conducted an investigation during the 60-day period following the           
          end of each calendar year.  This part of Mr. Goodson's testimony            
          is consistent with the agreement in which Pepsi had 60 days to              
          pay the marketing funds following the end of each 6-month                   
               We, however, reject petitioners' contention that the theater           
          company's right to the funds was dependent on Pepsi's approving             
          the funds, for it would require us to read a provision into the             
          agreement.  The agreement simply states that the flex and                   
          marketing funds were “contingent upon the Customer's complying              
          with * * * the * * * performance criteria”.  Because the theater            
          company had a guaranty of retaining the flex and marketing funds            
          as long as it performed under the agreement, we do not consider             
          the flex and marketing funds paid in 1996 to be refundable                  
          deposits as suggested by petitioners.8                                      

               7  The agreement did not explicitly provide that Pepsi had             
          60 days at the end of each 6-month period to pay the flex funds.            
               8  As to respondent's argument that the flex funds paid in             
          1996 for the first half of that year constituted advance                    
          receipts, we note that the agreement provided that flex funds               
          were “earned” when paid; that provision could lead to the                   
          conclusion that at the time the flex funds were received in 1996,           
          they were receipts on account of actual rather than expected                
          performance.  See infra note 9 for our interpretation of the word           

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