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consideration of petitioner’s duties and obligations under the
two agreements would pass muster as “royalties” is not a
question now before us. We believe, however, that the
reordering of relationships under the two agreements
constitutes a sufficiently significant change that those
relationships are not determinative of results under the credit
card program.
VI. Conclusion
Amounts received by petitioner pursuant to the SC-ABS
agreement during the years in question (the receipts)
constituted “royalties”, within the meaning of section
512(b)(2) and were not compensation for services. Therefore,
we need not consider petitioner's alternative arguments that
the receipts do not constitute UBTI.
Decision will be entered
for petitioner.
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