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received for preneed contracts were not income or property of
petitioner.
In contrast, respondent contends that petitioner obtained
dominion and control over the preneed funds at the time of
receipt such that the amounts are properly included in income as
advance payments under the all events test. Respondent further
argues that each of the exceptions relied upon by petitioner is
inapplicable on these facts.
Specifically, it is respondent’s position that advance
payments for services to be rendered by the taxpayer are not the
equivalent of a refundable security deposit or loan and, hence,
are not controlled by the standards set forth in Commissioner v.
Indianapolis Power & Light Co., supra. Second, respondent
emphasizes that petitioner’s control over the funds and the
absence of any contractual or legal restrictions preclude
treating the moneys as in trust.5 Finally, respondent alleges
that petitioner cannot qualify for the limited Artnell Co. v.
Commissioner, supra, exception to the all events test where there
exists no certainty as to when or whether petitioner will perform
under the contracts.
In connection with the section 6662 penalty, respondent
disputes petitioner’s assertions of substantial authority and
5 Accordingly, respondent considers Rev. Rul. 87-127, 1987-2
C.B. 156, dealing with the treatment of funeral trusts as grantor
trusts of the purchaser, inapplicable here.
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