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provides: “A bond or other evidence of indebtedness * * * issued
by any person and payable on demand shall be treated as a payment
in the year received, not as installment obligations payable in
future years.” (Emphasis added.) Section 15a.453-(1)(e)(3),
Temporary Income Tax Regs., 46 Fed. Reg. 10719 (Feb. 4, 1981),
provides that an obligation is treated as payable on demand only
if the obligation is treated as payable on demand under
applicable State or local law. See also Champy v. Commissioner,
T.C. Memo. 1994-355. Petitioner has not overcome the inference
to be drawn from WLJ & Co.’s customer account records for account
number 10051 and the contract notes that the demand debentures
(evidences of indebtedness) were, indeed, payable on demand. She
has failed to specify the applicable law or to prove that the
debentures would not be considered demand debentures under
applicable law. As a result, we find that the demand debentures
were evidences of indebtedness payable on demand. There were,
therefore, no payments after the year of sale with respect to
Omni’s sale of the MagnaCard stock, and the installment method of
accounting is unavailable.
On May 3, 1986, $2,299,920 was credited to RM & Sons’
account at WLJ & Co. with respect to the sale by Omni of the
MagnaCard stock. Of that sum, $1,006,163 was used to repay
indebtedness and the remainder purchased the demand debentures.
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