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of trading facilities, even though payment of the transfer fee is
a prerequisite to obtaining or retaining membership.
Respondent also argues that the transfer fees paid to
petitioner were for services provided to its members in
consideration of and in connection with membership transfers and
are thus taxable income. In support of this argument, respondent
asserts that, in exchange for the transfer fees, petitioner
performs the services listed supra p. 11.
We are not persuaded that these services are provided in
consideration of the transfer fee. An indicator of whether a
payment is for a good or service is whether the amount of the
payment is directly related to the amount and number of services
provided or merely incidental thereto. See James Hotel Co. v.
Commissioner, 39 T.C. 135, 142 (1962), affd. 325 F.2d 280 (10th
Cir. 1963); cf. sec. 1.311-1(e)(1), Income Tax Regs. In the case
at hand, the amounts of petitioner's transfer fees have no
quantifiable correlation with the amounts or extent of the
functions performed or services rendered by the Member Services
Department. The same functions are performed for the different
classes of members even though they pay different transfer fees.
In fact, 432 IDEM memberships were either sold or transferred
during the taxable years without the transferees paying any
transfer fees, and the Member Services Department performed the
same functions with respect to these transfers as it would have
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