- 19 - (because “when you use your Account you’ve agreed to the terms in this agreement”), petitioner in effect argues here that it is not so important after all. Petitioner points out that Rev. Proc. 71-21, supra, says that services must be provided by the close of the taxable year following the year of payment and that it does not say that the agreement must require services to be performed in the later year. Petitioner’s point is literally true, but it is at best misleading. First, to allow deferral of reporting of income to a time later than all the events occurred which fix the taxpayer’s right to receive the income is contrary to undisputed accrual accounting principles. See secs. 1.446-1(c)(1)(ii), 1.451-1(a), Income Tax Regs. Second, Rev. Proc. 71-21, supra, allows income to be reported in the next taxable year “as earned through the performance of * * * services”. Rev. Proc. 71-21, sec. 3.02. It is inherent in this language that petitioner must show that the payment was made at least in part for services to be performed in the next taxable year. See also id. secs. 1 and 2. As discussed above, the cardholder agreement clearly establishes that this is not the case here. Petitioner reissued credit cards evenly throughout the year, and reissuance did not necessarily coincide with the date petitioner charged the annual membership fee. However, petitioner has not shown that one of the acts for which the annual membership fee was paid--the issuance of a card--occurredPage: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
Last modified: May 25, 2011