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Respondent takes exception to petitioner's characterization
of the upfront payments as constituting advance trade discounts
exclusively. Respondent notes that, under each purchase
contract, Westpac agreed to maintain the manufacturer as the
primary or exclusive supplier of the relevant product line. In
addition, under the American Greetings and GTE Sylvania
contracts, Westpac agreed to maintain a specified amount of shelf
space for the manufacturer's product. Respondent therefore
argues that some portion of the upfront cash payments should be
characterized as made in consideration of these non-volume-
related commitments.
We hold that Westpac is not entitled to defer recognition of
the payments as income beyond the year of receipt. We explain
our decision below.
B. Tax Treatment of Payments
Section 61 broadly defines gross income as “all income from
whatever source derived”. See also sec. 1.61-1(a), Income Tax
Regs. In interpreting a predecessor to section 61, the Supreme
Court determined that the broad statutory language evidenced
congressional intent to tax all gains except those specifically
exempted. See Commissioner v. Glenshaw Glass Co., 348 U.S. 426,
7(...continued)
obligation. We therefore agree with petitioner that an implicit
repayment obligation existed in Westpac's contracts with
Ambassador and American Greetings.
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