Perry Funeral Home, Inc. - Page 15

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               forward a copy of said notice of cancellation to the                   
               named trustee of said funeral trust.                                   
          III.  Contentions of the Parties                                            
               We turn now to the parties’ contentions regarding                      
          application of the foregoing rules to petitioner’s situation.               
          Petitioner contends that the payments received pursuant to                  
          preneed contracts are not includable in gross income until the              
          underlying funeral goods and services are provided.  In support             
          of this assertion, petitioner references three alternative                  
          theories for exclusion.  Petitioner’s primary argument is that              
          the payments constitute nontaxable deposits under the reasoning             
          of Commissioner v. Indianapolis Power & Light Co., supra.                   
          Additionally, petitioner maintains that the amounts at issue                
          should be characterized as trust funds akin to those excluded               
          from income in cases such as Angelus Funeral Home v.                        
          Commissioner, supra.  Petitioner’s third basis for its treatment            
          of the payments is that even if the amounts are found to be                 
          advance payments of income, rather than deposits or trust funds,            
          their deferral is appropriate under the exception established in            
          Artnell Co. v. Commissioner, 400 F.2d 981 (7th Cir. 1968), revg.            
          and remanding 48 T.C. 411 (1967), to the general rule requiring             
          immediate inclusion of advances.                                            
               With respect to the section 6662 penalty, petitioner argues            
          that the lines of cases cited above provide substantial authority           
          and reasonable cause for taking the position that the funds                 

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