- 17 - 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 hasPage: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Next
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