106 T.C. No. 21
UNITED STATES TAX COURT
THE BOARD OF TRADE OF THE CITY OF CHICAGO AND SUBSIDIARIES,
Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8202-93. Filed May 29, 1996.
Petitioner (P) is a taxable membership corporation
that operates a futures exchange. When a membership on
the exchange is transferred, the transferee must pay P
a transfer fee, which, under P’s bylaws, is to be used
to “purchase, retire or redeem the indebtedness
encumbering the Board of Trade Building”, which houses
P’s trading floor and substantial office space leased
to third-party tenants. Held, the transfer fees are
nontaxable contributions to capital, rather than
taxable payments for services, because the transferees
pay the fees with an investment motive, as evidenced by
(1) the earmarking of the fees for reduction of P’s
mortgage indebtedness, (2) the resulting increase in
the members’ equity in P, and (3) the members’
opportunity to profit from their investment in P
because of the lack of restrictions on the
transferability of their membership interests.
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