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have to repay the advance as long as the dealer supply agreement
remained in effect. Respondent contends that the Amoco payment
is similar to those at issue in Westpac Pac. Foods v.
Commissioner, T.C. Memo. 2001-175, and Colombo v. Commissioner,
T.C. Memo. 1975-162, and, as such, constitutes income when
received in 1996. We disagree.
In Westpac Pac. Foods and Colombo, the obligations to repay
did not arise unless and until the party receiving the funds
breached the agreement to purchase a set amount of products, and
the repayment was proportionate to the amount of products not
purchased. In those cases, the obligations had none of the
characteristics of loans but rather more closely resembled
forfeiture penalties for failure to perform under the contract.
By comparison, when Amoco made the loan to petitioner,
petitioner had an absolute obligation to repay the entire
$175,000, and that obligation was secured by a mortgage on the
60th Street property. If petitioner had sold the 60th Street
property during the first year, Amoco would have been entitled to
$175,000 plus interest. When the first installment of $17,500 in
principal (plus interest) was due at the end of the first year,
petitioner’s obligation was reduced to $157,500 only because the
dealer supply agreement with Amoco remained in full force and
effect. Had petitioner sold the 60th Street property before the
end of the second year, Amoco would have been entitled to
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