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$157,500 (plus interest). Amoco is entitled to repayment of a
portion of the advance if petitioner sells the 60th Street
property any time before the end of the 10-year term of the note.
As we explained in Burnham Corp. v. Commissioner, 90 T.C.
953, 955-956 (1988), affd. 878 F.2d 86 (2d Cir. 1989),
Respondent’s argument blurs the fine but very real
distinction between a contingency that prevents a
liability from being fixed, i.e., a condition
precedent, and a contingency that may terminate an
already fixed liability, i.e., a condition subsequent.
* * *
If existence of a liability depends on
satisfaction of a condition precedent, the liability is
not unconditionally fixed * * *. Liability does not in
fact arise until the condition is satisfied. * * * A
liability subject to a condition subsequent, however,
is definitely fixed, subject only to a condition which
may cut off liability in the future. * * *
The focus is on the obligation created at the time of the
transaction. In Westpac Pac. Foods v. Commissioner, supra, and
Colombo v. Commissioner, supra, when the payments were made, the
recipient of the funds had no obligation to repay the funds.
That obligation would arise later if and when the recipient
breached its underlying obligation to purchase the products.
Here, when Amoco paid the $175,000 to petitioner, petitioner had
an unconditional obligation to repay the full amount of the
advance.
Respondent asserts that the advance was income to petitioner
in 1996 because petitioner had unfettered control over the
payment when petitioner received the payment in 1996. As pointed
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