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to share in the gross profits without bearing the risk of loss.
Id. Gross profits are the difference between sales and the cost
of goods sold. Black's Law Dictionary 703 (6th ed. 1990).
Petitioner had a gross profits interest in the credit card
program, not a net profits interest. Petitioner received a fixed
percentage of all of the authorized cash purchases and advances,
and a fixed amount for new accounts, regardless whether USNB had
losses from the affinity credit card program. Here, as in Sierra
Club, no provision was made to periodically compute net income or
loss from the credit card program. The fact that petitioner did
not have a net profits interest supports petitioner's contention
that its income from the program was a royalty.
In Sierra Club, the taxpayer paid no direct mail costs.
Sierra Club, Inc. v. Commissioner, supra at 333. We said that if
the taxpayer had borne some of the expenses of marketing credit
cards to its members, its interest would have been less of a
gross profits interest. Id. at 334. During the years in issue,
petitioner spent a total of $20,040 and was reimbursed by USNB
for $15,761. This amount is de minimis and does not affect our
conclusion that petitioner did not have a net profits interest.
5. Petitioner’s Desire To Make Money From the Affinity
Credit Card Program
Respondent points out that petitioner entered into the
affinity credit card agreement in part to make money. This,
however, is not a basis for us to conclude that petitioner’s
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