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always by the end of the next succeeding taxable year.
Petitioner reported the annual fees in income on a pro rata
basis over a 12-month period. Since the full range of services,
including contingent services performed on the cardholder's
demand, would be available over the 12-month period for which the
fee was paid, it would be "not unreasonable" to anticipate that a
substantially ratable portion would be performed or available to
be performed in whatever portion of the 1-year period remained at
the end of any given taxable year. The cardholder pays for
services to be available at all times over the 1-year period of
the agreement, whether or not the particular cardholder avails
himself of those services.
Petitioner's pro rata inclusion of income over the 12-month
period is reasonable and within the purview of Rev. Proc. 71-21.
We think the revenue procedure does not require the type of
matching of income and expense that respondent insists upon. The
revenue procedure permits accrual basis taxpayers to defer the
inclusion in gross income of payments received (or due and
payable) in one year for services to be performed by the end of
the next succeeding taxable year. Petitioner's method does that.
The purpose of the revenue procedure was to reconcile tax and
financial accounting treatment of such payments without
permitting extended deferral beyond the end of the next
succeeding taxable year. Petitioner's method is that required
for financial and regulatory accounting purposes; hence the
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