Signet Banking Corp. v. Commissioner
United States Tax Court
P is in the banking business. P issued credit cards. P charged its credit card holders an annual membership fee. The cardholder agreement provided that the fee was paid in consideration of the issuance of a card and establishment of a credit limit. The agreement stated that P could close a cardholder's account at any time and that the annual membership fee was nonrefundable. P is an accrual method taxpayer.
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P is in the banking business. P issued credit cards. P charged its credit card holders an annual membership fee. The cardholder agreement provided that the fee was paid in consideration of the issuance of a card and establishment of a credit limit. The agreement stated that P could close a cardholder's account at any time and that the annual membership fee was nonrefundable. P is an accrual method taxpayer. Held, it was not an abuse of discretion for R to conclude that P must report annual membership fees in income in the year of receipt. Held, further, Rev. Proc. 71-21, 1971-2 C.B. 549, does…
1Opinion of the Court
Colvin, Judge:
Respondent determined deficiencies in petitioner’s Federal income tax of $233,464 for 1982, $689,257 for 1983, $1,177,475 for 1984, and $1,529,931 for 1985.
The sole issue for decision is whether annual membership fees petitioner received from its credit card customers are includable in income in the year in which petitioner received them, or whether petitioner may defer the income over a 12-month period under Rev. Proc. 71-21, 1971-2 C.B. 549.
Under the cardholder agreements in effect during the years in issue, the annual membership fee was paid in consideration of the issuance…
2Cases cited7 opinions
- Lucas v. American Code Co.Supreme Court of the United States · 1930
- Frank Lyon Co. v. United StatesSupreme Court of the United States · 1978
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- Barnett Banks v. CommissionerUnited States Tax Court · 1996
- American Express Co. v. United StatesUnited States Court of Federal Claims · 2000
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