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after payment of the fee. On the contrary, the required act--the
issuance of a card--probably always or almost always occurred
before payment of the annual membership fee. An example may help
to illustrate this point. Assume petitioner issues a new card on
March 1 and bills for the annual membership fee on October 1.
In that situation, issuance of the card precedes payment of the
annual membership fee. Thus, when the fee is paid, petitioner
has already performed one of the acts required by the cardholder
agreement, lending no support to reporting the income after the
petitioner receives the fee. The same point would apply if the
card were issued for more than 1 year, as was petitioner’s
general practice for MasterCards.
Now assume petitioner does not issue a card to a new
customer until after the customer pays the annual membership fee.
In that case, assuming that issuance of a card is a service under
Rev. Proc. 71-21, supra, petitioner might not be required to
report the fee income until it issues the card because it is an
act required by the cardholder agreement. This latter example
has no bearing on this case, however, because petitioner did not
show (or try to show) that it delayed initial issuance of a
credit card until after it received annual membership fees from
any customers.
Petitioner argues that, under section 3.06(b) of Rev. Proc.
71-21, supra, it may treat the annual membership fee as earned
ratably over the membership year because it was “not unreasonable
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