In consideration of the FEEDER agreeing to guarantee and insure the OWNER against a total net loss of more than Five and no/100 dollars ($ 5.00) per head the OWNER agrees that, in final settlement of this contract, the FEEDER shall receive 50% ⁴ of any net profit realized from this transaction, determined at the time of final settlement of all obligations under this contract. In understanding that if any net loss results to the OWNER after sale due to market decline, mortality, or any other cause whatsoever, the FEEDER guarantees that the loss will be limited to the amount stated above in this paragraph, it is also understood that the FEEDER will refund to the OWNER any and all sums in excess of the stated loss per head. In computing the net profit or loss, any item for which the OWNER expended cash in connection with this contract shall be included in the computation.

* * *

10. VETERINARY SERVICES. 1975 U.S. Tax Ct. LEXIS 167">*182 The FEEDER agrees to pay all expenses of reasonable, customary, ordinary or necessary veterinary services, which the FEEDER agrees to provide for OWNER'S cattle during the term of this contract as responsible care requires.

* * *

13. TERMINATION OF CONTRACT. This agreement shall terminate automatically, unless the OWNER by written notice elects otherwise, if or when the FEEDER dies, becomes bankrupt or insolvent, makes any assignment for the benefit of creditors, attempts to sell, mortgage, pledge, remove, dispose of or injure any cattle belonging to the OWNER, if any distress, execution or attachment is levied upon the cattle or any part thereof, or if any distress, execution or attachment is levied upon any premises, equipment or other asset belonging to the FEEDER which, in the judgment of the OWNER or the OWNER'S agent, will render continued performance under the terms of this contract impossible.

In addition, the OWNER shall have the right to terminate this agreement upon three (3) days written notice to the FEEDER if the FEEDER violates any provision of this contract or becomes involved in any financial difficulty which, in the opinion of the OWNER'S banking connection, may impair1975 U.S. Tax Ct. LEXIS 167">*183 his financial responsibility.

64 T.C. 1">*8 Upon termination of this contract under this clause, the FEEDER shall deliver forthwith the OWNER'S cattle in accordance with directions supplied by the OWNER or his agent; and the OWNER is hereby authorized to enter upon any premises where the cattle, or any part thereof, may be found, and take possession of and remove such cattle, and, in addition to possession of the cattle, the FEEDER guarantees to the OWNER the return of such feed as may have been unconsumed and in excess of the amount that could have reasonably been used till the date of termination.

The FEEDER hereby agrees, during the entire period covered by this contract, to keep the OWNER'S cattle where they may be seen and inspected by the OWNER or his agent, and the FEEDER agrees never to place OWNER'S cattle in circumstances or on premises to which the OWNER is, or may be, denied free access.

In the event that this contract is terminated in accordance with the terms and conditions of this section (Numbered item 13) and the FEEDER is unable to deliver the OWNER'S cattle in accordance with the directions supplied by the OWNER or his AGENT, the FEEDER hereby agrees that the alternative1975 U.S. Tax Ct. LEXIS 167">*184 shall be immediate delivery to the OWNER of a cash sum equal to the reasonable market value [of] the cattle at the time delivery of same was directed, less the amount of the outstanding first mortgage for which the cattle were pledged as collateral, in addition to such other sums specified above as being immediately due the OWNER upon termination of this contract under this section (numbered item 13).

The table below shows the figures relevant to each of the contracts:

1975 U.S. Tax Ct. LEXIS 167">*185 The feed cost was a figure negotiated between the parties for each separate contract. The two factors primarily influencing this cost were: (1) The availability of feed for that particular geographical area of the country and (2) the type and size of the animal. Pursuant to the four contracts, Mid-Western paid $ 212,885 in 1964 and deducted that amount on its 1964 corporate income tax return.

At the time the feeder cattle contracts were entered into, neither Owens nor his accountants had any knowledge of either a shortage or abundance of feed. At that time, one of the feeders, Mutual Feed Co., through its affiliate Cook Livestock Co., had on hand the feed required by its contract. Mid-Western expected to make a profit from the feeder cattle activity but to reduce its 1964 tax liability by deducting the prepaid expense for cattle feed 64 T.C. 1">*9 against its other profits. Between March 30, 1965, and July 12, 1965, the cattle owned by Mid-Western were sold. On the four contracts, Mid-Western realized a total net profit of $ 9,907.08, i.e., the amount received in excess of all sums paid out by Mid-Western. In the accountings between Oppenheimer and Mid-Western, the latter received1975 U.S. Tax Ct. LEXIS 167">*186 credit for amounts representing unused feed with respect to two contracts and was charged additional amounts for excess feed in respect of the other two contracts.

By 1965, Lybrand had been appointed as Alexander Hamilton's certified public accountants and petitioner had frequent contact with Lybrand's representatives. In May 1965, Halperin had a discussion with one Tommy Thompson (hereinafter Thompson) about the fact that there were two men in Florida who had large net operating losses which they were interested in utilizing. As a result, Halperin and Paonessa spoke with Manuel Santeiro, a.k.a. Manolo Santeiro (hereinafter Santeiro), and Enrique Rousseau (hereinafter Rousseau) ⁵ about purchasing the stock of Mid-Western. However, because Halperin and Paonessa feared the possibility that the Internal Revenue Service would raise collapsible corporation issues, a sale of the stock was deferred until the cattle had been sold and the gain realized by Mid-Western. In the latter part of July or the early part of August 1965, Paonessa arranged a meeting in Palm Beach, Fla., at which time he and Halperin met with Rousseau, Santeiro, and Thompson, their accountant. ⁶ By this time, petitioner1975 U.S. Tax Ct. LEXIS 167">*187 had decided to sell his Mid-Western stock, so long as an acceptable deal could be worked out. His stated reasons were: (1) His accountants recommended it and (2) he was so busy at Alexander Hamilton that he had no time to devote to any business operations by Mid-Western.

At the meeting in Palm Beach, two items were resolved: (1) The price of the stock and (2) an indemnification agreement which was to be incorporated into the contract. On August 20, 1965, petitioner entered into an agreement with Rousseau and Santeiro for the sale of his Mid-Western stock. Relevant parts of this agreement provide:

64 T.C. 1">*10 2. [Petitioner] agrees to sell said 4,000 shares of stock and [Rousseau and Santeiro] agree to buy the same for the sum of $ 262,842.26 cash, on the representation that the assets of MID-WESTERN INVESTMENT CORPORATION1975 U.S. Tax Ct. LEXIS 167">*188 are represented to consist solely of the sum of $ 299,822.62 cash, and that there are no debts or claims, contingent or otherwise, now existing against said corporation.

3. [Petitioner] hereby agrees to hold [Rousseau and Santeiro], jointly and severally, harmless from any loss that may result to them or either of them as stockholders of MID-WESTERN INVESTMENT CORPORATION because of any tax, claim, action, or demand against MID-WESTERN INVESTMENT CORPORATION and to reimburse [Rousseau and Santeiro] for any expenses which they as stockholders or to which the corporation may be put in defending any claims against said corporation that exist now, contingent or otherwise, against said corporation or which may arise against said corporation as a result of the sale of this stock by [petitioner], and likewise, [petitioner] agrees to hold harmless [Rousseau and Santeiro], or either of them, from any transferee liability that may be asserted against [Rousseau and Santeiro], or either of them, as transferees of said stock by virtue of this sale and to reimburse them for any costs or expenses incurred by [Rousseau and Santeiro] in defending any such claims, actions or demands. Notwithstanding1975 U.S. Tax Ct. LEXIS 167">*189 anything to the contrary contained in this paragraph 3, [petitioner] shall not be liable to [Rousseau and Santeiro], or either of them, for any tax, claim, action, or demand against MID-WESTERN INVESTMENT CORPORATION resulting on account of any act or omission of [Rousseau and Santeiro], or either of them, or their successor or successors, subsequent to the sale contemplated by this Agreement, or on account of any act or omission of any one or more of the members of the Board of Directors, or the officers of MID-WESTERN INVESTMENT CORPORATION, subsequent to the sale contemplated by this Agreement.

* * *

5. [Rousseau and Santeiro] understand that the said MID-WESTERN INVESTMENT CORPORATION (in this paragraph 5 called "MIC") has elected with the consent of its shareholder at the time of such election to be treated as a small business corporation under § 1372(a) of the Internal Revenue Code of 1954, as amended, and, jointly and severally, they agree that they will not do, permit to be done, or cause or permit MIC to do, either intentionally or unintentionally, any act or thing to cause the revocation or failure of such election for the calendar year 1965, and they, jointly and severally, 1975 U.S. Tax Ct. LEXIS 167">*190 agree to hold [petitioner] harmless and promptly to reimburse [petitioner] for any taxes which he shall be required by law to pay by reason of such revocation or failure of such election, any taxes which he shall be required to pay in such event over and above those taxes which he would have been required to pay had such election remained in full force and effect for the entire calendar year 1965.

The closing of the transaction occurred in New York City at the Bank of Nova Scotia, from which Rousseau and Santeiro borrowed the funds to purchase the stock. The only people at the closing were Paonessa, Rousseau, and Santeiro. Pursuant to the 64 T.C. 1">*11 closing, petitioner received $ 262,842.26 for his Mid-Western stock.

On August 20, 1965, a check for $ 299,822.62, drawn on Mid-Western's checking account, was paid by the National Bank of Detroit. The effect of this check was to reduce the balance in the account to zero.

Rousseau and Santeiro timely filed shareholder consents to continue Mid-Western's 1965 subchapter S election. On August 23, 1965, Mid-Western adopted a resolution of liquidation. A certificate of dissolution, signed on September 7, 1965, by Rousseau and Santeiro, was1975 U.S. Tax Ct. LEXIS 167">*191 filed on December 23, 1965, with the Michigan Corporation and Securities Commission. On its 1965 tax return, Mid-Western reported taxable income of $ 245,650.31 and that this $ 245,650.31 was distributed to Rousseau in the amount of $ 140,020.68 and to Santeiro in the amount of $ 105,629.63.

On their 1965 joint return, petitioner and his wife reported the sale of Mid-Western stock as resulting in $ 246,925 of long-term capital gain.

On December 30, 1969, respondent issued a notice of deficiency to petitioner and his wife for 1965 which determined that Mid-Western's 1965 undistributed subchapter S income of $ 245,650.31 was taxable to them and made a corresponding adjustment in the amount reported as long-term capital gain on the stock sale.

On December 30, 1969, respondent also issued a notice of deficiency to petitioner as transferee of the assets of Mid-Western which determined that a $ 103,601.41 deficiency in Mid-Western's corporate income tax for the taxable year 1964 was due. In addition, separate notices of deficiency were issued to Rousseau and Santeiro as transferees of the assets of Mid-Western which determined that a $ 103,601.41 deficiency in Mid-Western's corporate 1975 U.S. Tax Ct. LEXIS 167">*192 income tax for the taxable year 1964 was due from each of them. Each of these notices stated that Mid-Western "has been dissolved and the assets were transferred to you on or about August 20, 1965."

OPINION

The threshold issue is the determination whether the transaction between petitioner, on the one hand, and Santeiro and Rousseau, on the other, in August 1965 should be treated in 64 T.C. 1">*12 accordance with its purport as a bona fide sale or, contrariwise, should be viewed as merely a "paper cover" for what was essentially a distribution by Mid-Western of its cash to petitioner with a commission having been paid to Santeiro and Rousseau. If the former is the proper view to be taken, petitioner ceased to be a shareholder and correctly treated the transaction as giving rise to capital gain, with the result that Santeiro and Rousseau became taxable, as the shareholders of Mid-Western, on its undistributed subchapter S income for the taxable year 1965 and as transferees in respect of any deficiency in Mid-Western's income taxes for the taxable year 1964. On the other hand, if the "paper cover" view prevails, petitioner is the proper person to be taxed with respect to both segments of1975 U.S. Tax Ct. LEXIS 167">*193 respondent's determination.

The resolution of this issue, under the peculiar circumstances of this case, involves a dual burden of proof. As to the taxable year 1965, the burden of proof is on the petitioner to show that the transaction constituted a bona fide sale so that he ceased to be a shareholder of Mid-Western. Welch v. Helvering, 290 U.S. 111">290 U.S. 111 (1933); Rule 142(a), Tax Court Rules of Practice and Procedure. As to the taxable year 1964, resolution of the issue is critical to the determination that petitioner was a transferee of the assets of Mid-Western; in this frame of reference, respondent has the burden of proof. Sec. 6902(a). Thus, it is possible to hold against each party -- petitioner as to 1965 and respondent as to 1964.

Certain facts have been satisfactorily established. It is clear that at the time of the transaction: (1) Mid-Western's sole asset was $ 299,822.62 in cash and it had no disclosed liabilities; (2) Santeiro and Rousseau borrowed the money from the Bank of Nova Scotia to make the payment to petitioner; (3) on August 20, 1965, the contract between petitioner, on the one hand, and Santeiro and Rousseau, on the other hand, 1975 U.S. Tax Ct. LEXIS 167">*194 was executed; (4) on the same day, the $ 299,822.62 was withdrawn from Mid-Western's bank account and apparently ⁷1975 U.S. Tax Ct. LEXIS 167">*195 the contract was closed; (5) the closing took place at the office of the lending institution (the Bank of Nova Scotia) in New York City; (6) Santeiro and Rousseau made no use of Mid-Western after the closing, having 64 T.C. 1">*13 resolved on August 23, 1965 (3 days later), to dissolve Mid-Western and having completed the dissolution by the end of the year; (7) Santeiro and Rousseau were receptive to engaging in the transaction because of losses which they believed they could apply against any of the undistributed subchapter S income of Mid-Western; (8) petitioner, irrespective of any other considerations, had significant tax motives for engaging in the transaction; and (9) the provisions of the agreement between petitioner and Santeiro and Rousseau were constructed so as to require the undertaking by the latter to continue the subchapter S status of Mid-Western, a consideration normally of no significance to the sellers of the stock. ⁸

In certain other respects, which to our mind are important, there are gaps in the evidence which cause the record herein to be inconclusive. (Why these gaps exist is best known to the parties.) Among the inconclusive elements are the following:

(1) Santeiro and Rousseau were represented, during the negotiations and consummation of the August 20, 1965, transaction, by an accountant and a lawyer. While petitioner contends that the latter were independent professional advisers, we are not so easily swayed. Neither Rousseau nor Santeiro nor their professional representatives were called as witnesses at the trial. That Paonessa and Halperin may have testified that these advisers were independent and adverse to them clearly is testimony from interested witnesses which we are not required to accept at face value. E.g., Braunstein v. Commissioner, 305 F.2d 949, 952 (2d Cir. 1962),1975 U.S. Tax Ct. LEXIS 167">*196 affg. 36 T.C. 22">36 T.C. 22 (1961), affd. on other grounds 374 U.S. 65">374 U.S. 65 (1963); Seletos v. Commissioner, 254 F.2d 794, 797 (8th Cir. 1958), affg. T.C. Memo. 1956-283.

(2) None of the records relevant to the loan from the Bank of Nova Scotia have been presented to the Court. We have not been made aware of the term of, nor the collateral for, this loan, when it was made or repaid, nor the source of the funds for repayment.

(3) On August 20, 1965, $ 299,822.62 was paid out of the Mid-Western bank account, completely closing the account. No evidence relative to the manner in which this was accomplished or the use to which the funds were put has been introduced into evidence.

64 T.C. 1">*14 (4) Among petitioner's purposes for divesting himself of his interest in Mid-Western was that he was involved, full-time, in the operation and management of Alexander Hamilton, but no evidence was offered to explain why the divestiture took the form of a sale of the shares, aside from the anticipated tax advantages.

(5) Any business purpose Rousseau and Santeiro may have had for acquiring Mid-Western, beyond1975 U.S. Tax Ct. LEXIS 167">*197 the fact that its sole asset was $ 299,822.62 cash ($ 36,980.36 greater than the purchase price) and their purported offsetting tax losses, was never elucidated.

(6) Three days subsequent to the August 20, 1965, transaction, Rousseau and Santeiro adopted a resolution of liquidation for Mid-Western. A certificate of dissolution filed with State authorities on December 23, 1965, had been signed on September 7, 1965. No evidence as to when the plan of liquidation was conceived has been presented. ⁹

It is against this background that we proceed to a resolution of the threshold issue and the underlying problem of the burden of proof. We start off with the well-established and oft-cited proposition that the taxation of a particular transaction depends upon its substance, not the form into which the taxpayer has chosen to cast it. Commissioner v. Court Holding Co., 324 U.S. 331">324 U.S. 331, 324 U.S. 331">334 (1945);1975 U.S. Tax Ct. LEXIS 167">*198 Higgins v. Smith, 308 U.S. 473">308 U.S. 473, 308 U.S. 473">476 (1940); Griffiths v. Helvering, 308 U.S. 355">308 U.S. 355, 308 U.S. 355">357-358 (1939); Waterman Steamship Corporation v. Commissioner, 430 F.2d 1185, 1192-1193 (5th Cir. 1970), revg. on other grounds 50 T.C. 650">50 T.C. 650 (1968); Aaron Kraut, 62 T.C. 420">62 T.C. 420, 62 T.C. 420">428 (1974). Tempering this proposition, however, is the equally well-recognized proposition that, "The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted." Gregory v. Helvering, 293 U.S. 465">293 U.S. 465, 293 U.S. 465">469 (1935). The synthesis of these two propositions can be expressed as follows: "The building may not be constructed entirely from the tax advantage, but, if the foundation and bricks have economic substance, the economic or financial inducement of the tax advantage can provide the mortar." See W. Lee McLane, Jr., 46 T.C. 140">46 T.C. 140, 46 T.C. 140">145 (1966), affd. per curiam 377 F.2d 557 (9th Cir. 1967).

Petitioner1975 U.S. Tax Ct. LEXIS 167">*199 asserts that the transaction was, in all respects a valid sale to third parties negotiated at arm's length and the fact 64 T.C. 1">*15 that beneficial tax advantages accrued to petitioner is merely a fruit of good tax planning. However, "When one purports to sell cash in corporate solution the burden is surely particularly severe on the seller to show that the only purpose served is not tax avoidance." John D. Gray, 56 T.C. 1032">56 T.C. 1032, 56 T.C. 1032">1069 (1971), on appeal (9th Cir., Sept. 18, 1974). Petitioner has not begun to carry that burden. His reason for selling out was that he was too busy at Alexander Hamilton to play any role at Mid-Western. While this may explain his reasons for terminating his relationship with Mid-Western, it certainly does not explain the reasons for negotiations and the cumbersome process of a sale. The record reflects no evidence to show that Mid-Western was a viable corporate entity at any time subsequent to July 12, 1965, the date on which the last sale of cattle apparently took place. It had ceased all activities by that time. See John D. Gray, ibid. Thus, petitioner could merely have left it to die a natural death. Any business1975 U.S. Tax Ct. LEXIS 167">*200 reasons Santeiro and Rousseau may have had for purchasing Mid-Western is something about which we are merely left to guess. In hindsight, it seems clear that they had none. See Waterman Steamship Corporation v. Commissioner, 430 F. 2d at 1193 n. 18; cf. Davant v. Commissioner, 366 F.2d 874, 880-881 (5th Cir. 1966), affg. on this issue 43 T.C. 540">43 T.C. 540, 43 T.C. 540">566-567 (1965); John D. Gray, 56 T.C. 1032">56 T.C. 1068-1069.

In light of the foregoing and our evaluation of the record as a whole, we conclude:

(1) Petitioner has not carried his burden of proof that he did any more than transfer his interest in Mid-Western's cash from one pocket to another, albeit using different trousers. As the Supreme Court said in Minnesota Tea Co. v. Helvering, 302 U.S. 609">302 U.S. 609, 302 U.S. 609">613 (1938), "A given result at the end of a straight path is not made a different result because reached by following a devious path." Accordingly, we hold that as to the taxable year 1965 petitioner should be treated as having received a distribution of earnings and profits from Mid-Western. ¹⁰ See1975 U.S. Tax Ct. LEXIS 167">*201 sec. 1373(b).

(2) As to the issue of transferee liability in respect of Mid-Western's taxable year 1964, such gaps in the record as may exist do not deny us the ability to draw reasonable inferences from the evidence before us. McDermott v. John Baumgarth Co., 286 F.2d 864, 86864 T.C. 1">*16 (7th Cir. 1961); Willett v. Commissioner, 277 F.2d 586, 589 (6th Cir. 1960). Based upon such evidence and the reasonable inferences drawn therefrom, we conclude that there is sufficient evidence in the record to establish a prima facie case that the "sale" by petitioner to Santeiro and Rousseau was not bona fide. Such being the case, the burden was on petitioner to come forward with countervailing evidence sufficient to overcome respondent's prima facie case, which he has not done. Benoit v. Commissioner, 238 F.2d 485, 492 (1st Cir. 1956),1975 U.S. Tax Ct. LEXIS 167">*202 vacating and remanding on other grounds 25 T.C. 656">25 T.C. 656 (1955); Robinette v. Commissioner, 139 F.2d 285, 288 (6th Cir. 1943); George M. Newcomb, 23 T.C. 954">23 T.C. 954, 23 T.C. 954">961 (1955). Accordingly, we hold that petitioner is liable as a transferee for any deficiency in the income taxes of Mid-Western for the 1964 taxable year.

The remaining issue is whether the cattle feed expense, prepaid by Mid-Western in its 1964 taxable year, is properly deductible by Mid-Western in that year. This issue has been extensively explored by this and other courts and reflects a confused history characterized by varying guidelines and governing principles. See Mann v. Commissioner, 483 F.2d 673 (8th Cir. 1973), revg. T.C. Memo. 1972-162, and cases collected therein; Pinney & Olson, "Farmers' Prepaid Feed Expenses," 25 Tax Lawyer 537 (1972). Moreover, there has been an evolutionary decisional process starting with R. D. Cravens, 30 T.C. 903">30 T.C. 903 (1958), revd. 272 F.2d 895 (10th Cir. 1959), and continuing through Mann v. Commissioner, supra.1975 U.S. Tax Ct. LEXIS 167">*203 Such being the case, it is obvious that the early guidelines and principles may no longer have their original vitality. Perhaps the only eternal guideline or principle that can be gleaned from prior decisions is that each case must be decided in light of its particular facts and circumstances. Cf. Tim W. Lillie, 45 T.C. 54">45 T.C. 54 (1965), affd. per curiam 370 F.2d 562 (9th Cir. 1966).

Concededly, Mid-Western was an absentee cowboy; it did not customarily participate in cattle-raising activities. Moreover, the potential tax benefits were substantial and were clearly a motivating factor in its determination to engage in the transactions involved herein. While these circumstances should not per se deprive Mid-Western of those benefits, they clearly justify careful scrutiny of the terms of the contractual arrangements which were utilized and the manner in which those 64 T.C. 1">*17 arrangements were implemented. See Cravens v. Commissioner, 272 F.2d 895, 898 (10th Cir. 1959), revg. 30 T.C. 903">30 T.C. 903 (1958).

Moreover, in approaching our decision, we assume, for the purposes of this case, 1975 U.S. Tax Ct. LEXIS 167">*204 that the "tax treatment of advance payments for livestock feed" is a sui generis proposition to which principles governing other types of advance payment do not apply. See Mann v. Commissioner, 483 F. 2d at 676. In so doing, we do not imply that such principles might not be applied in other cases involving livestock feed. Finally, we will also accept, for the purposes of this case, the mandate of the Eighth Circuit Court of Appeals that the key to the resolution of the question before us is "refundability." See Mann v. Commissioner, 483 F. 2d at 678. In view of our conclusion that the advance payments by Mid-Western were refundable, we need not decide the extent to which we will adopt this narrow test in other situations where the advance payments are found to be nonrefundable, but it may nevertheless be proper to conclude that deductibility in the year of payment should not be permitted. Compare Casco Products Corp., 49 T.C. 32">49 T.C. 32, 49 T.C. 32">37 (1967). That conclusion also makes it unnecessary for us to deal with the "ordinary and necessary" business expense requirement of section 162 -- an aspect 1975 U.S. Tax Ct. LEXIS 167">*205 that has commanded the attention of the courts in previously decided cases. ¹¹

In the foregoing context, we address ourselves to the question whether the advance payments by Mid-Western were refundable.

Under the terms of paragraph 6 of the contracts, Mid-Western agreed to "purchase feed from the Feeder and Feeder [agreed] to deliver to the owner at the commencement of [the] contract [a specified number of] dollars of feed per head." The dollar amount was negotiated in light of the current price of the feed as related to the type and size of the animal to be fattened, the geographical area where the cattle were to be raised, and the type of feed involved. Neither the type of feed nor the amount of each type was specified. While it may well be that the absence of such specificity is not determinative1975 U.S. Tax Ct. LEXIS 167">*206 (see Mann v. Commissioner, 483 F. 2d at 680), it seems to us that it is an element to be considered in determining whether a payment is refundable. The fact of the matter is that such specificity was present in every decided case 64 T.C. 1">*18 with the exception of Estate of Frank Cohen, T.C. Memo. 1970-272 (contract 204 KA), and in that situation the taxpayer did not prevail. ¹² But we need not rest our decision upon lack of specificity because of other elements in the transactions involved herein.

Petitioners place heavy reliance on the fact that the contracts provided for a fixed price for the feed and that Mid-Western was therefore not at the risk of the market in respect of its obligation to pay for feed. Clearly, this element should not be determinative -- obviously, if the parties to a contract so intend, an advance payment based1975 U.S. Tax Ct. LEXIS 167">*207 on a fixed price can be a deposit. Nevertheless, such an element is entitled to considerable weight. The difficulty in according it such weight herein lies in the fact that adjustments were to be made between the parties to the contracts depending upon the weight gain achieved. If the prescribed level of weight gain was exceeded, the feeder was entitled to receive a bonus payment from Mid-Western and, indeed, under two of the four contracts, Mid-Western was charged with such a bonus. Even this factor of an upside risk would not necessarily compel the conclusion that the advance payments were deposits (cf. 30 T.C. 903">Cravens v. Commissioner, supra, and John Ernst, 32 T.C. 181">32 T.C. 181 (1959)) if Mid-Western had not been entitled to credit on the downside. But the agreements provided that, to the extent that the prescribed weight gain was not met, Mid-Western was entitled to receive a penalty payment from the feeder and in the remaining two contracts it was credited with such a penalty. In such a context, and keeping in mind that the advance payment was negotiated in light of the anticipated feed requirements of the cattle involved, we1975 U.S. Tax Ct. LEXIS 167">*208 think that the bonus and penalty provision simply reflects an intended quantitative adjustment in the feed payment depending upon future events and thus points in the direction of a deposit.

Even provision for such an adjustment would not per se cause petitioner to fail. Thus, petitioner contends that Mid-Western was entitled to receive a refund of feed only if the contracts were terminated for specific causes such as death, bankruptcy, or insolvency of the feeder. Concededly, paragraph 13 of the contract so provides, and, since none of such events appears to have occurred, no feed was ever returned in kind to petitioner. 64 T.C. 1">*19 The difficulty with petitioner's contention, however, is that, as has already been pointed out, Mid-Western in fact did receive adjustments by way of dollar credits when the weight gain was insufficient to absorb the advance payment. Significantly, both the credit and the charge adjustments (where the advance payment was more than absorbed by the weight gain) were made at the same per-pound rate used in the calculation of the advance payment. In short, the feeder, not the owner, bore the risk of the market, in both directions, on the imputed1975 U.S. Tax Ct. LEXIS 167">*209 unused feed. Surely this is inconsistent with the proposition that the feed was purchased by Mid-Western in 1964.

Another element casts a further shadow over petitioner's contention. Paragraph 8 of the contracts contains a guarantee that Mid-Western's net loss would not exceed $ 5 per head. This paragraph does not simply provide that Mid-Western would not be called upon to pay in excess of $ 5 per head toward any loss that might occur. It provides that "the Feeder will refund to the owner any and all sums in excess of the stated loss per head." (Emphasis added.) Thus, the paragraph goes beyond a mere exchange of an obligation to contribute additional funds beyond $ 5 per head to cover losses for the feeder's right to share in profits to the extent of 50 (or 60) percent. Since a total of 2,199 head of cattle were involved in the four contracts, Mid-Western could not have been out-of-pocket more than $ 10,995 out of the $ 212,885 advance payments, even if other expenditures of Mid-Western for the cattle, interest, etc., are ignored. This limitation on Mid-Western's exposure overrides the unlikely but theoretical possibility that a catastrophic drop in cattle prices combined1975 U.S. Tax Ct. LEXIS 167">*210 with a huge weight gain might have, in the absence of such limitation, produced bonuses large enough to absorb all of the advance payments.

Although the issue is not entirely free from doubt, we conclude upon the basis of all the facts and circumstances revealed by the record herein that the advance payments by Mid-Western in its 1964 taxable year were deposits. ¹³ Accordingly, we sustain respondent's determination of the amounts disallowed as a deduction in that year.

Decisions will be entered under Rule 155.