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to anticipate at the end of the taxable year of receipt that a
substantially ratable portion of the services will be performed
in the next succeeding taxable year”. Sec. 3.06(b) of Rev. Proc.
71-21, supra at 549. Petitioner argues that most of the services
it provides are contingent on whether a cardholder uses a card.
We disagree that petitioner qualifies under section 3.06(b)
of Rev. Proc. 71-21, supra. That section applies if a taxpayer
receives an advance payment pursuant to an agreement which
requires the taxpayer to perform contingent services on a
continuing basis in order to earn the payment. Sec. 3.06, Rev.
Proc. 71-21, supra. The cardholder agreement does not require
petitioner to perform contingent services of that kind. It
requires petitioner to issue a card and establish a credit limit.
Once petitioner does those things, petitioner may close an
account at any time.
Petitioner cites Cozine & Showfety, “Advance Payments for
Goods and Services”, 2 Tax Adviser 602 (1971); and Sobeloff, “New
Prepaid Income Rules: IRS Reversal of Position Will Aid Many
Taxpayers”, 33 J. Taxn. 194 (1970). These articles are useful
discussions of Rev. Proc. 70-21, 1970-2 C.B. 501, and Rev. Proc.
71-21, supra, but they do not give any reason for us to agree
with petitioner on the issue in dispute here.
Petitioner points out that respondent has ruled that the
merchant discount earned by a bank operating a credit card plan
is service income which a cash basis bank should include in
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