Perry Funeral Home, Inc. - Page 19

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          summarized that “if the payor controls the conditions under which           
          the money will be repaid or refunded, generally, the payment is             
          not income to the recipient.”  Herbel v. Commissioner, supra at             
          413.  “On the other hand, if the recipient of the payment                   
          controls the conditions under which the payment will be repaid or           
          refunded, we have held that the recipient has some guaranty that            
          it will be allowed to keep the money, and hence, the recipient              
          enjoys complete dominion over the payment.”  Id. at 414.                    
               Thus, while refundability per se is insufficient for                   
          identifying nontaxable deposits, Johnson v. Commissioner, 108               
          T.C. 448, 470-471 (1997), refundability within the buyer’s                  
          control and outside that of the seller is a significant indicator           
          under the current jurisprudence.  Additionally, to the extent               
          that any further factual refinement is warranted to distinguish             
          “the Indianapolis Power & Light line of cases” from earlier                 
          opinions discounting the importance of the refundability                    
          criterion, the law classifying amounts as nontaxable deposits is            
          clear at least insofar as “the taxpayer’s right to retain them              
          was contingent upon the customer’s future decisions to purchase             
          services and have the deposits applied to the bill.”  Johnson v.            
          Commissioner, supra at 471.                                                 
               As to other potential indicia, both the Supreme Court in               
          Commissioner v. Indianapolis Power & Light Co., supra, and this             
          Court have held that factors such as control over deposits (i.e.,           

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Last modified: May 25, 2011