106 T.C. No. 4
UNITED STATES TAX COURT
BARNETT BANKS OF FLORIDA, INC. AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16295-93. Filed February 29, 1996.
P, an accrual basis taxpayer, is in the banking business and
issues credit cards. P charges its cardholders an annual
membership fee that entitles the cardholder to, inter alia, use
of the card with participating merchants, free replacement of
lost or stolen cards, 24-hour access to P's customer service
staff, and withholding of payment of disputed charges. P has the
right to cancel the credit card at any time, but, if the card is
cancelled, the annual fee is refunded ratably for the number of
months remaining in the 1-year period.
1. Held, the annual membership fees constitute payments for
services rendered or made available to cardholders rather than
payments in the nature of additional interest or loan commitment
fees.
2. Held, further, under Rev. Proc. 71-21, 1971-2 C.B. 549,
P may report the annual membership fees in income ratably over
the 12-month period after receipt.
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