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To qualify under sec. 1.451-5(c), Income Tax Regs., for
deferral of income on an agreement to provide goods, the taxpayer
must (1) account for advance payments pursuant to a method
described in paragraph (b)(1)(ii) of this section for tax
purposes, (2) receive substantial advance payments with respect
to such agreement, and (3) have on hand or have available in that
year through the taxpayer’s normal source of supply the kind and
quantity of goods needed to satisfy the agreement in such year.
Petitioners contend they received layaway deposits in 1995, and
that, under section 1.451-5(c)(1)(i)(c), Income Tax Regs., that
amount is not income in 1995. We disagree.
Petitioners offered no evidence showing the amount of
payments they received in 1995 for layaway sales was not
completed in that year. We have no basis on which to estimate
the amount of those payments.
Petitioners have not shown they qualify for deferral of
income under section 1.451-5(a), Income Tax Regs. Advance
payments4 may be included in income not later than the second
year following the year of receipt of these payments if, among
4 To qualify as an advanced payment for goods, (1) the
payment must be an amount received pursuant to an agreement for
sale or other disposition in the future of goods, (2) the payment
must be applied against such agreement, and (3) the goods which
are the subject of the agreement must be held by the taxpayer
primarily for sale to customers in the ordinary course of the
taxpayer’s trade or business. Sec. 1.451-5(a)(1), Income Tax
Regs.
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