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basis for the number of months remaining in the 1-year period.
Cardholders had the opportunity to use their cards for payment at
a large number of businesses, negating the risk of carrying large
amounts of cash or the restrictions on writing checks.
Cardholders had access to petitioner's customer service staff on
a 24-hour basis, and the right to withhold payment on disputed
charges. We agree with petitioner that its cardholders remitted
the annual fees as payment for services.
Clear Reflection of Income
The general rule for the taxable year of inclusion of income
appears in section 451. Section 451(a) requires that:
The amount of any item of gross income shall be
included in the gross income for the taxable year in
which received by the taxpayer, unless, under the
method of accounting used in computing taxable income,
such amount is to be properly accounted for as of a
different period.
Section 446(a) provides that "Taxable income shall be computed
under the method of accounting on the basis of which the taxpayer
regularly computes his income in keeping his books." The accrual
method of accounting is one permissible method of computing
taxable income. Sec. 446(c)(2). Petitioner is an accrual basis
taxpayer and has kept its books regularly in accordance with this
method. Section 1.446-1(c)(ii), Income Tax Regs. provides:
Accrual method. Generally, under an accrual
method, income is to be included for the taxable year
when all the events have occurred which fix the right
to receive such income and the amount thereof can be
determined with reasonable accuracy. * * *
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