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over the 12-month period covered by the membership agreements,
which at times extended beyond the year in which the dues were
received. The Supreme Court held in both Auto. Club and AAA that
the taxpayers’ deferral of the prepaid membership dues did not
clearly reflect the taxpayers’ income and that the dues should be
included in the taxpayers’ income in the year of receipt. AAA v.
United States, supra at 694-695, 698; Auto. Club of Mich. v.
Commissioner, supra at 189-190. The Supreme Court noted the
“artificial” nature of accruing advance dues in income on a 12-
month ratable basis and over two periods where performance of the
services to be rendered by the taxpayers was indefinite and
uncertain (i.e., where no fixed dates for performance of the
services were specified and where the specific services for which
the funds were received were to be performed by the taxpayers
only upon customer demand). AAA v. United States, supra at 690-
691; Auto. Club of Mich. v. Commissioner, supra at 189-190.
In Schlude v. Commissioner, supra, a taxpayer received funds
as advance payments on dance lessons to be given at unspecified
times in the future to be determined by the students. In
requiring the taxpayer to include the funds in income in the year
of receipt, the Supreme Court relied upon its prior decisions in
Auto. Club and AAA, focusing on the uncertainty as to when the
dance lessons were to be given. Schlude v. Commissioner, supra
at 135-137.
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