Indianapolis Power & Light trips circuits.

Journal of Accountancy, December, 2007 by Reichert, Charles J.

In a split decision, the Third Circuit Court of Appeals required a grocer to include in gross income a payment characterized as a loan from a supplier. The loan could be forgiven if the grocer, Karns Prime and Fancy Foods Ltd. of Harrisburg, Pa., purchased a certain volume of goods. But because Karns had no unconditional obligation to repay the proceeds when it executed the purchase agreement, the loan was more in the nature of an advance rebate, the majority opinion said.

The court thus reached an opposite conclusion from the Ninth Circuit earlier in Westpac Pacific Foods v. Commissioner, a ruling the IRS agreed to follow this summer (see "Tax Matters," JofA, Dec. 06, page 80, and Sept. 07, page 86). That case involved payments explicitly designated as advance...

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