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petitioner and directly paid for capital assets used for the
production of income in petitioner’s trade or business, and there
would have been no tenable argument that the payments were in
consideration for goods or services. The transfer fees, paid at
the time of the acquisition of a membership, reduce the principal
of the mortgage debt on the CBOT building each year. The
periodic collection of the transfer fees is the equivalent of
installment payments for the building. We fail to see a
significant difference where petitioner's members make their
capital contributions in “installments instead of all at once."
See Lake Forest, Inc. v. Commissioner, T.C. Memo. 1963-39; see
also sec. 49.4243-2(a), Excise Tax Regs. supra note 18, which
equate amounts paid to retire mortgage indebtedness incurred to
finance construction or reconstruction of capital improvements
with exempt payments for capital improvements.
Petitioner's members have not paid dues since at least 1990.
The dues were eliminated because of a surplus in petitioner's
operating revenues, largely attributable to petitioner’s lease
revenues and transaction fees. The nonpayment of dues is a form
of additional profit to the members. See Minnequa Univ. Club v.
Commissioner, T.C. Memo 1971-305. The transfer fees, therefore,
help finance the major sources of petitioner's revenues and
directly increase the members' profit potential from their
investment.
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