- 21 -
conditions precedent merely because they may comprise a
significant percentage of the overall activities conducted by the
broker.
Petitioner argues that this case is governed by Hallmark
Cards, Inc. v. Commissioner, 90 T.C. 26 (1988). In Hallmark, a
manufacturer and seller of greeting cards shipped its Valentine
merchandise to customers in the year prior to that in which the
holiday occurred. The terms of the sale specified that title and
risk of loss did not pass to the customer until January 1 of the
year following the shipment. This Court held that the taxpayer’s
right to income from the sale became fixed only upon passage of
title and risk of loss to the purchasers, notwithstanding that
delivery of the goods had occurred earlier. Id. at 32-33.
Petitioner argues that because title to the securities does not
pass, and petitioner is not relieved of its risk of loss until
the settlement date, its right to the commission income is not
fixed until the settlement date.
Hallmark v. Commissioner, supra, is distinguishable from the
instant case. In Hallmark, the taxpayer was a manufacturer and
seller of goods. Thus, passage of title and risk of loss
constituted the essence of the transaction; without such passage,
no sale occurred. Conversely, the present case involves a
service provider that executes securities trades as an agent of
its customers. We think that the focus in this case must be on
the contractual relationship between petitioner and its customer,
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011