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obligated petitioner to design and manufacture telephone systems
that were not in existence at the time of contracting. Thus, the
purchase agreements are contracts to sell nonexisting property in
the future, and the agreements do not give the third-party
customers an ownership interest in the telephone systems. See
Beck v. Commissioner, T.C. Memo. 1987-359.
Each purchase agreement bound petitioner to supply a
telephone system that met certain requirements on a date
specified. Until that date, each telephone system and each
component that made up the system were the exclusive property of
petitioner. When the third-party customers entered into the
assignment and delegation agreements with the subsidiary, the
subsidiary received the third-party customer’s contractual right
to receive nonexisting property in the future. The third-party
customer could not transfer ownership interests in property that
it had not yet acquired itself. Instead, the subsidiary’s
ownership interests in the telephone systems were derived by
sales from petitioner. The subsidiary did not receive its
ownership interest in the telephone systems until the burdens and
benefits of ownership shifted from petitioner, as seller, to the
subsidiary, as purchaser.
Reliance by respondent on First Am. Natl. Bank v. Chicken
Sys. of Am., 616 S.W.2d 156 (Tenn. Ct. App. 1980), is misplaced.
In First Am. Natl. Bank, an owner of real estate (lessor) entered
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