Sierra Club, Inc. - Page 32




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          perform services, particularly including the service of                     
          endorsing and promoting the credit card program.                            
               As has been well established, in many respects, the SC-ABS             
          agreement is ambiguous.  Nevertheless, considering both the SC-             
          ABS agreement and the circumstances preceding and following its             
          execution, we conclude that petitioner's obligation to                      
          cooperate was not an agreement to endorse or promote the credit             
          card program beyond the endorsement that necessarily results                
          from petitioner’s license of its logo, name, and the other                  
          intangibles here in question.                                               
               The use of petitioner's name, marks, logo, and its                     
          continued endorsement was precisely the valuable consideration              
          petitioner provided pursuant to the SC-ABS agreement, and it                
          was precisely for what ABS was paying.  Petitioner may have                 
          approved solicitations and communications to the members with               
          respect to the credit card program, but it was ABS that                     
          designed and paid for those communications, which actions were,             
          primarily, for its own benefit, pursuant to its duties under                
          the SC-ABS agreement.  Respondent has stated in a revenue                   
          ruling that income from the endorsement of products, use of                 
          signatures and trademarks, and review of licensed products is a             
          royalty within the meaning of section 512(b)(2).  Rev. Rul. 81-             
          178, 1981-2 C.B. 135 (distinguishing circumstance where                     
          personal services, in the form of appearances and interviews,               
          are required).  Accord Mississippi State Univ. Alumni, Inc. v.              
          Commissioner, T.C. Memo. 1997-397.                                          

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