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Commissioner v. Indianapolis Power & Light Company

United States Supreme Court
493 U.S. 203 (1990)


Indianapolis Power & Light Company (IPL) (plaintiff) required customers with poor credit to make monetary deposits, thereby ensuring their payment of future IPL electric bills. IPL would refund the deposit if the customer chose not to use IPL’s electricity or met other specified conditions. IPL paid the customer interest on the deposit. However, IPL did not report deposits as gross income. The commissioner of the Internal Revenue Service (defendant) issued a deficiency notice, finding that the deposits were gross income because they were advance payments to IPL for electricity service. IPL disagreed, reasoning that a deposit was a loan that IPL would repay if the customer met one of the specified conditions for receiving a refund. IPL petitioned the United States Tax Court for a redetermination, and the tax court held for IPL. The United States Court of Appeals for the Seventh Circuit affirmed. The United States Supreme Court granted certiorari on the issue because the Seventh and Eleventh Circuits disagreed as to the appropriate test for determining whether a deposit constitutes gross income.

Rule of Law


Holding and Reasoning (Blackmun, J.)

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