- 2 -
Held, it was not an abuse of discretion for R to
conclude that P must report annual membership fees in
income in the year of receipt.
Held, further, Rev. Proc. 71-21, 1971-2 C.B. 549,
does not permit P to report income from annual
membership fees later than the year of receipt.
COLVIN, Judge: Respondent determined deficiencies in
petitioner's Federal income tax of $233,464 for 1982, $689,257
for 1983, $1,177,475 for 1984, and $1,529,931 for 1985.
The sole issue for decision is whether annual membership
fees petitioner received from its credit card customers are
includable in income in the year in which petitioner received
them, or whether petitioner may defer the income over a 12-month
period under Rev. Proc. 71-21, 1971-2 C.B. 549.
Under the cardholder agreements in effect during the years
in issue, the annual membership fee was paid in consideration of
the issuance of a card and the establishment of a credit limit,
petitioner could close any account at any time, and the fee was
nonrefundable. Petitioner’s right to receive the annual
membership fees was not contingent on petitioner’s performance of
any service after the year of receipt. We hold that it was not
an abuse of discretion for respondent to conclude that petitioner
must include the fees in income in the year of receipt.
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