Signet Banking Corporation - Page 12

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          income tax, financial, accounting, and regulatory reporting                 
          purposes.  Petitioner reported about 50 to 75 percent of the                
          annual membership fees it received each year and deferred the               
          balance to the next year.  Petitioner reported the deferred                 
          portion as income in the following year for tax, financial, and             
          regulatory purposes.                                                        
          7.   Joint Venture Agreement                                                
               On March 26, 1986, petitioner and Fidelity Bank & Trust Co.            
          (Fidelity) signed a joint venture agreement under which: (a)                
          Fidelity agreed to market petitioner's MasterCards to some of its           
          customers, (b) petitioner agreed to service the accounts (send              
          periodic statements, receive and process payments, handle                   
          merchant charge authorizations, respond to customer inquiries,              
          etc.), and (c) Fidelity and petitioner agreed to divide any                 
          profits earned on the accounts.  Petitioner estimated its                   
          servicing costs based on its actual 1985 costs of servicing                 
          MasterCard accounts and its budgeted 1986 costs.  Under the                 
          agreement, petitioner received a monthly servicing fee of $2 per            
          month per account or $24 per year for the first 12 months.  After           
          the first 12 months, upon 60 days’ notice to Fidelity petitioner            
          could raise the monthly servicing fee to cover actual increases             
          in expenses in servicing the accounts.                                      








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