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as taxable income but not its income from the affinity credit
card program. Petitioner reported its income from the sale of
merchandise as UBTI but treated its income from the credit cards
as a royalty. The record does not show why petitioner treated
the Wayneco payments and the payments at issue differently.
However, the fact that petitioner did not treat the Wayneco
payments and the affinity credit card program payments
consistently does not deprive the payments at issue of status as
a royalty.
Respondent speculates that the credit card fosters less
affinity towards MSU by its members than the items for sale with
the "walking bulldog" trademark because those are likely to be
viewed by members more often than a credit card that is kept in a
wallet. We disagree. Ward and Grafton testified without
contradiction that the credit cards and the items bearing the MSU
"walking bulldog" trademark encourage good will between
petitioner's members and MSU; nothing in the record supports
respondent's view.
E. Failure To Refer to PB&T's Payments to Petitioner as
Royalties in the 1987 Agreement
Respondent contends that the payments at issue are not
royalties because the 1987 agreement did not call them royalties.
Respondent contends that under Commissioner v. Danielson, 378
F.2d 771 (3d Cir. 1967), vacating and remanding 44 T.C. 549
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