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21. Section 3.02 permits the taxpayer to include the payments in
income "as earned through the performance of the services".
Section 3.06 sets forth methods that may be used in determining
the amount of an advance payment that is earned in a taxable year
where the agreement requires the performance of contingent
services. Section 3.06 reads:
In any case in which an advance payment is
received pursuant to an agreement which requires the
taxpayer to perform contingent services, the amount of
an advance payment which is earned in a taxable year
through the performance of such services may be
determined (a) on a statistical basis if adequate data
are available to the taxpayer; (b) on a straight-line
ratable basis over the time period of the agreement if
it is not unreasonable to anticipate at the end of the
taxable year of receipt that a substantially ratable
portion of the services will be performed in the next
succeeding taxable year; or (c) by the use of any other
basis that in the opinion of the Commissioner, results
in a clear reflection of income.
The language of section 3.06 instructs the taxpayer as to how to
report the payments from contingent service agreements; it does
not preclude such payments for contingent services from the
application of Rev. Proc. 71-21. Also, examples 4 and 5 given in
section 3.12 refer to contingent service providers and do not
require a matching of the service contract income with
performance of specific services.
We have found that the annual credit card fees were payments
for services provided to or made available to the cardholders.
The period of the agreement covered by the fee was 12 months;
thus, all services would be performed within a 1-year period and
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