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contention because, even if they are services, they are clearly
not provided ratably over the 12-month period.4
Petitioner views the annual membership fee as paid for the
various cardholder services. Petitioner contends that the cards
would be useless if it did not provide services such as
authorization of purchases, sending of statements, processing of
payments, responding to cardholder questions, and replacing lost
or stolen cards. We agree, but the cardholder agreement, written
by petitioner, clearly states the payment is for something other
than those services.
Petitioner argues that many services are “contemplated” by
the agreement. Petitioner points out that the agreement states
that the cardholder may use the card to buy goods and services
wherever the card is honored and to get cash advances in various
ways; that petitioner will send a periodic statement to the
cardholder; that the cardholder should notify petitioner if the
card is lost or stolen; that the cardholder may be liable for
misuse of his or her card up to $50; that the cardholder has
certain rights under the Fair Credit Billing Act if there is a
4 We do not decide whether annual membership fees must
be reported in the year of receipt if they are governed by
cardholder agreements which differ substantially from the ones
at issue here. As stated, the cardholder agreement at issue
here provides that the fee is nonrefundable and is paid in
consideration of issuance of the card and establishment of a
credit limit, and the card may be canceled at any time by
petitioner or the cardholder. Cf. Barnett Banks of Florida,
Inc. v. Commissioner, 106 T.C. ___ (1996), filed today.
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