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reasonable cause. Respondent points particularly to the
reporting by petitioner of interest on the preneed payments, the
choice to invest the funds in petitioner’s name rather than in
regulated trust accounts, and the advice petitioner received from
its accountant pertaining to the BayBank escrow account.
IV. Preneed Accounting
We first consider whether the preneed payments at issue
should be treated as deposits governed by Commissioner v.
Indianapolis Power & Light Co., 493 U.S. 203 (1990). The Supreme
Court in Commissioner v. Indianapolis Power & Light Co., supra at
210, established what is referred to as the “complete dominion”
test for identifying those payments over which the taxpayer has
such control as to render them income:
In determining whether a taxpayer enjoys “complete
dominion” over a given sum, the crucial point is not
whether his use of the funds is unconstrained during
some interim period. The key is whether the taxpayer
has some guarantee that he will be allowed to keep the
money. * * *
Further, the answer to this inquiry “depends upon the parties’
rights and obligations at the time the payments are made.” Id.
at 211.
With respect to distinguishing between taxable advance
payments and nontaxable deposits, the Supreme Court further
explained:
An advance payment, like the deposits at issue here,
concededly protects the seller against the risk that it
would be unable to collect money owed it after it has
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