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loan and generally required the taxpayer to pay a nonrefundable
commitment fee. Most commitments also required the taxpayer to
pay an additional “deposit fee” in the event the loan failed to
close. The “deposit fee” usually equaled 1 percent of the
proposed loan. When the taxpayer received the commitment from
the institutional investor, the taxpayer issued its own
commitment to the borrower, which incorporated the terms and
conditions of the institutional investor’s commitment. The
borrower was required to pay a commitment fee and an additional
fee equal to the nonrefundable fee that the taxpayer paid to the
institutional investor. The taxpayer had a fixed right to the
commitment fee when the borrower accepted its commitment;
however, the taxpayer reported the fees in income when the loans
were permanently funded. The taxpayer argued that under the “all
events” test, it had not earned the fees until the loans were
actually funded.
The Court found that the taxpayer’s “commitment fees were
received as a payment for specific services rendered to the
borrower in arranging for a favorable loan package for the
borrower with an institutional investor.” Id. at 878. The Court
explained that the commitment fees compensated the taxpayer for
“evaluating the economic potential of the proposed project,
finding a willing investor to provide financing and then
negotiating two separate commitments, one from the institutional
investor and one that it issues to the borrower.” Id. The Court
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