income recived in advance is generaklly taxable in the year received
Comm. vs. Indianapolis Power & Light Co. 110 S. Ct. 589 (1990)
The U.S. Supreme Court made a distinction between the taxation of refundable deposits. The Court confirmed advance payments are generally taxable and defined "advance payments" as a non-refundable payment. With a nonrefundable payment the payee is "guaranteed" it can keep the money as long as the payee performs its own obligation under the contract.
Michaelis Nursery Inc. 69 TCM (1995) (CCH) 2300, T.C. Memo 1995-143
Sole issue is whether amounts received by Nursery from its customers in connection with the sale of trees should have been recognized as income in the year the payments were received or in subsequent years, when the trees were delivered. Court held that the deposits received by the Corporation were advance payments of income constituting taxable income to the petitioner when received. The corporation enjoyed "complete dominion" over these payments because it had no obligation to repay any amount to the buyers unless the corporation defaulted on its commitment to deliver the trees.
