arose. Therefore, Malibu's share of the natural gas produced from "all Contract Wells" remained committed for sale to Arkla under the contract. Similarly, Arkla remained obligated under section 9 of the contract to take a minimum volume of gas on an annual basis or to pay Malibu for a volume of gas "equal to the difference between the volume actually received during the Contract Year and the minimum volume Buyer [i.e., Arkla] was obligated to receive during the year." The settlement agreement provides that Arkla's payment of $1,850,000 "shall constitute a prepayment in advance for natural gas to be delivered by Seller to Buyer on and after May 1, 1988 from all wells subject to the Contract". In order to effectuate Arkla's receipt of a volume of natural gas in an amount equal to the prepayment, the settlement agreement further provides that 50 percent of the volume of natural gas delivered to Arkla under the contract during the period May 1, 1988, through the remaining term of the contract or until the prepayment is fully recouped, shall be considered recoupment gas and shall be received without further payment. The value of the gas delivered to Arkla under the contract is to be based upon "the price per MMBtu in effect under the terms of the Contract, as amended this date, at the time such natural gas is requested for delivery under the Contract." While the settlement agreement does not disturb Arkla's obligation of purchasing gas from Malibu, or Malibu's obligation of selling gas to Arkla, the binding nature of those obligations is alleviated somewhat under the settlement agreement. As to Arkla's take or pay obligation, the settlement agreement provides that Malibu: waives any and all claims relating to or arising out of the Contract, including any failure to take gas or to pay for gas not taken by Buyer [Arkla], in respect of all natural gas available for production from all properties committed to the Contract from the Effective Date of the Contract through June 30, 1990. As to Malibu's obligation to sell gas produced from the subject wells to Arkla, the settlement agreement provides that, upon Malibu's request, the parties to the settlement shall enter into a release agreement under which gas committed to the performance of the contract that is in excess of the quantity requested by Arkla can be released from the con tract and sold to third parties. In consideration of the release of gas from the contract, Malibu would agree in the release agreement that Arkla would be entitled to credit any gas released and sold to third parties against "any obligations and liabilities it may have to take gas, or to pay for gas not taken". Furthermore, Malibu would also agree in the release agreement to waive and release Arkla from any obligations and liabilities for failure to take gas, or to pay for gas not taken, during the time the release agreement is in effect. If Malibu requests it, the release agreement would continue for a primary term beginning on May 1, 1988, and extending through to June 30, 1990, and would continue on a monthto-month basis thereafter, unless and until terminated by either party upon 30 days' written notice. There is insufficient evidence in the record to find whether or not such release agreement was ever executed. The settlement agreement further provides that any part of the prepayment which is not recouped from deliveries of natural gas shall be refunded to Arkla upon the happening of any one of three events. The settlement agreement provides as follows: Seller [Malibu] shall refund to Buyer [Arkla] the unrecouped balance of the Prepayment, if any, at the earlier of such time as (i) the Contract is cancelled or otherwise terminated by Seller, (ii) the Contract's primary term expires and the Contract is terminated by Seller or (iii) the wells subject to the Contract substantially deplete. In summary, the underlying premise of the settlement is that Arkla would continue as the principal purchaser of gas produced from Malibu's interest in the contract wells. Based upon the agreements forming the settlement, we agree with respondent's contention that Arkla's payment of $1,850,000 is a prepayment for the purchase of natural gas under the contract. The agreements contemplate that Arkla would recoup the prepayment from its purchases of natural gas under the contract. The refund provision quoted above is in the nature of a guaranty, to the effect that any unrecouped balance of the settlement payment will be returned to Arkla in the event that Malibu terminates the contract, or the wells became substantially depleted. None of the three events which trigger a cash refund is within Arkla's control, such that Arkla is in control of the timing and method of repayment. See Commissioner v. Indianapolis Power & Light Co., 493 U.S. at 209. To the contrary, Arkla retained no right to insist upon the return of the payment so long as Malibu does not terminate the contract, and the wells do not become substantially depleted. Petitioners argue that Malibu lacks complete dominion over the settlement payment. According to petitioners, Arkla could refrain from ordering any natural gas under the contract, and could await the substantial depletion of the wells. In this way, petitioners argue, Arkla could force Malibu to make a cash refund of the settlement payment. Petitioners assert that this is possible because Arkla is not obligated to purchase any gas under the settlement agreement. We disagree with the premise of petitioners' argument. In fact, Arkla is obligated to take a minimum volume of gas per year under the contract. Under the settlement agreement, however, Malibu has agreed to waive any claims relating to or arising out of the contract, including Arkla's failure to take or pay for gas through June 30, 1990. After that date, there will be no waiver of Arkla's take or pay obligation, except through the release agreement that Malibu must invoke. In any event, even if Arkla could refrain from taking any gas under the contract, the refund of any unrecouped balance of the settlement payment requires that "the wells subject to the Contract substantially deplete." As mentioned above, that event is not within Arkla's control. Moreover, we agree with the court in Continental Ill. Corp. v. Commissioner, 998 F.2d 513, 521 (7th Cir. 1993), affg. in part and revg. in part T.C. Memo. 1991-66, T.C. Memo. 1989-636, and T.C. Memo. 1988-318, which observed in a similar case that "income does not cease to be such because there is some likelihood that the recipient may have to give it back." In these cases, the possibility that the wells might become substantially depleted before the settlement payment is fully recouped may reduce the certainty of Malibu's income stream, but it does not convert income into the equivalent of a deposit or a bailment. See id. In light of the foregoing, An appropriate order will be issued denying petitioners' motion for summary judg ment. LEAR EYE CLINIC, LTD., ET AL.,1 PETITIONERS v. RESPONDENT Docket Nos. 13406-90, 19117-90, 177-91. Filed June 10, 1996. Held, for purposes of determining the limitation under sec. 415(b), I.R.C., on benefits of a plan, the term "service with the employer" shall include service with businesses that antedate the plan sponsor where the transition results in a mere technical change in the employment relationship and continuity otherwise exists in the substance and administration of the business. Held, further, in applying the foregoing to Lear, service with a sole proprietorship, which was incorporated and subsequently sponsored the plan, will count as service with the employer. Held, further, in Brody Enterprises, service with an alleged sole proprietorship and a law firm, neither of which had any continuous relationship to the sponsor of the plan, does not constitute service with the employer. Gregory A. Robinson, Brad S. Ostroff, and Neil H. Hiller, for petitioners. Anne W. Durning, for respondent. SUPPLEMENTAL FINDINGS OF FACT AND OPINION CLAPP, Judge: These cases are before the Court on remand from the U.S. Court of Appeals for the Ninth Circuit for further consideration consistent with that court's opinion. Citrus Valley Estates, Inc. v. Commissioner, 49 F.3d 1410 (9th Cir. 1995), affg. in part and remanding in part 99 T.C. 379 (1992). Subsequent to the remand of these cases, the parties filed a stipulation of facts (supplemental stipulation of facts) and briefs relating to the issue on remand. 1 Cases of the following petitioners are consolidated herewith: Lear Eye Clinic, Ltd., An Arizona Professional Corporation, docket No. 19117-90; and Brody Enterprises, Inc., docket No. 177-91. *This opinion supplements our previously filed opinion in Citrus Valley Estates, Inc. v. Commissioner, 99 T.C. 379 (1992), affd. in part and remanded in part 49 F.3d 1410 (9th Cir. 1995). The issue for decision on remand is whether the plan participants properly counted their previous employment towards the section 415(b) maximum benefit limitations. We hold that the participant in the Lear Eye Clinic plan properly counted his previous employment, but the participant in the Brody Enterprises plan did not. All section references are to the Internal Revenue Code as in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure, unless otherwise indicated. FINDINGS OF FACT In this opinion, we incorporate by reference the facts set out in our opinion in Citrus Valley Estates, Inc. v. Commissioner, 99 T.C. 379 (1992). We set forth and discuss in this opinion findings of fact arising from the supplemented record. We also incorporate by reference the supplemental stipulation of facts. Lear Eye Clinic, Ltd. In 1975, Samuel Pallin (Pallin) commenced practice as an ophthalmic physician in Phoenix, Arizona. His practice grew over the years, offering various medical procedures performed by Pallin or other physicians in the practice. He practiced as a sole proprietor from 1975 until October 1, 1979. From sometime in 1978 through October 1, 1979, the proprietorship employed Gerald Walman (Walman) as an associate physician. On October 1, 1979, Pallin and Walman incorporated Lear Eye Clinic, Ltd.2 (Lear). Pallin and Walman owned 51 percent and 49 percent, respectively, of the Lear stock. The administration of the medical practice and Pallin's duties and responsibilities did not change as a result of the formation of Lear. Nor did the practice's staff, physicians, or patients change due to the formation of Lear. Effective October 1, 1984, Lear adopted a defined benefit plan (the Lear plan). Pallin was the only participant in the plan. The Lear plan's enrolled actuary used the following 2 Pallin and Walman incorporated the Eye Center, Ltd., and later changed the name to Lear Eye Clinic, Ltd. For convenience, the term "Lear" refers to the Eye Center, Ltd., as well as Lear Eye Clinic, Ltd., unless otherwise indicated. |