(c) Nor did this amount constitute a trust fund for the benefit of the purchaser. Angelus Funeral Home v. Commissioner, 47 T.C. 391 (1967), affd. on other grounds 407 F.2d 210 (9th Cir. 1969), and Miele v. Commissioner, 72 T.C. 284 (1979), distinguished. 2. Pursuant to secs.
Accordingly, first assuming arguendo that the Fund was received in trust subject to a legally enforceable restriction, "our task is to determine whether the economic benefit to [petitioner] as trustee is such that [petitioner] should be taxable on receipt of the payments, notwithstanding whatever power the [TPHOs] may have to enforce the trust terms under state law." Angelus Funeral Home v. Commissioner, 407 F.2d 210, 212 (9th Cir. 1969) (citing Gracelawn Mem'l Park, Inc. v. United States, 260 F.2d 328, 332 (3d Cir. 1958) (assuming that valid trust fund existed but concluding that funds were "readily available to promote future capital improvements in the taxpayer's property" and thus includible in gross income)), aff'g 47 T.C. 391 (1967); see Nat'l Mem'l Park, Inc. v. Commissioner, 145 F.2d 1008, 1013 (4th Cir. 1944) (concluding that, even if fund had been shown to be a valid trust fund, it would be includible in gross income because "the benefit of the fund inured primarily to the [taxpayer]").
Petitioners argue that the Dealership acted as a mere conduit in collecting these funds and transferring them to the Escrow Trustees, that the purchasers owned the funds held in the PLRF, and that the Dealership first acquired property rights in the reserve funds when the funds were disbursed to it by the Trustees. Petitioners find support for this theory chiefly in Angelus Funeral Home v. Commissioner, 47 T.C. 391, 1967 WL 1307 (1967), affd. on other grounds 407 F.2d 210 (9th Cir.1969), and Miele v. Commissioner, 72 T.C. 284, 1979 WL 3785 (1979). Petitioners contend that “It would be impossible to find for Respondent on this issue without expressly overruling this Court's previous opinion in Angelus Funeral Home,” and “The situation presented in Miele is virtually indistinguishable from that presented here.”
1974—2 C.B. 5); Dri-Powr Distributors Association Trust, 54 T.C. 460 (1970) (nonacq. 1974—2 C.B. 5); Angelus Funeral Home, 47 T.C. 391 (1967) (acq. 1969—1 C.B. 20), affd. 407 F.2d 210 (9th Cir. 1969); Broadcast Measurement Bureau, Inc., 16 T.C. 988 (1951) (nonacq. 1974—2 (C.B. 4); Seven-Up Co., 14 T.C. 965 (1950) (acq. in result 1974—2 C.B. 4).
Ford Dealers Advert. Fund, Inc. v. Commissioner, 55 T.C. 761, 771 (1971), aff'd, 456 F.2d 255 (5th Cir. 1972); see also Angelus Funeral Home v. Commissioner, 47 T.C. 391 (1967), aff'd, 407 F.2d 210 (9th Cir. 1969). If a purported trustee has the right to use the funds for his own benefit--even if that right is limited--no trust exists, and the funds are includible in gross income.
There is another line of cases that analyze what might be income to an accrual taxpayer when money is paid to a trustee or escrow agent. In 33 Angelus Funeral Home v. Commissioner, 47 T.C. 391, 392 (1967), aff'd, 407 F.2d 210 (9th Cir. 1969), the taxpayer sold "pre-need" funeral services for an upfront payment and with small monthly payments until the total outstanding balance was paid.
Schlude v. Commissioner, 372 U.S. 128 (1963); American Automobile Association v. United States, 367 U.S. 687 (1961); Automobile Club of Michigan v. Commissioner, 353 U.S. 180 (1957); RCA Corp. v. United States, 664 F.2d 881 (2d Cir. 1981); Angelus Funeral Home v. Commissioner, 407 F.2d 210 (9th Cir. 1969), affg. 47 T.C. 391 (1967); S. Garber, Inc. v. Commissioner, 51 T.C. 733 (1969); Popular Library, Inc. v. Commissioner, 39 T.C. 1092 (1963). But cf. Artnell Co. v. Commissioner, 400 F.2d 981 (7th Cir. 1968), revg. and remanding 48 T.C. 411 (1967); Boise Cascade Corp. v. United States, 208 Ct. Cl. 619, 530 F.2d 1367 (1976); Collegiate Cap & Gown Co. v. Commissioner, T.C. Memo. 1978-226.
Because we uphold petitioner's tax treatment of customer deposits in fiscal 1966, there is no "change" in method of accounting in that year which would trigger application of sec. 481. Angelus Funeral Home v. Commissioner, 47 T.C. 391, 397 (1967), affd. on another issue 407 F.2d 210 (9th Cir. 1969), cert. denied 396 U.S. 824 (1969). To support his position, respondent cites cases holding that amounts received by a lessor are advance rentals, rather than security deposits, and are thus taxable in the year of receipt.
Because we uphold petitioner's tax treatment of customer deposits in fiscal 1966, there is no “change” in method of accounting in that year which would trigger application of sec. 481. Angelus Funeral Home v. Commissioner, 47 T.C. 391, 397 (1967), affd. on another issue 407 F.2d 210 (9th Cir. 1969), cert. denied 396 U.S. 824 (1969). To support his position, respondent cites cases holding that amounts received by a lessor are advance rentals, rather than security deposits, and are thus taxable in the year of receipt.
Clearly, services were rendered, solely on demand in the fashion of the American Automobile Association and Automobile Club of Michigan cases. (Fn. ref. omitted.) Until the decision by the Seventh Circuit in Artnell Co. v. Commissioner, 400 F.2d 981 (7th Cir. 1968), revg. and remanding 48 T.C. 411 (1967), this Court had cited the Supreme Court cases as establishing a rule of nondeferral, e. g., Cox v. Commissioner, 43 T.C. 448, 455-456 (1965); William O. McMahon, Inc. v. Commissioner, 45 T.C. 221, 226 (1965); Decision, Inc. v. Commissioner, 47 T.C. 58, 62 (1966); Angelus Funeral Home v. Commissioner, 47 T.C. 391, 399 (1967); see also S. Garber, Inc. v. Commissioner, 51 T.C. 733, 735-736 (1969). The Seventh Circuit in Artnell Co. v. Commissioner, supra, has held that the nondeferral rule is not absolute.