Rev. Rul. 58-17

The owner and operator of a swimming school, in order to construct a new swimming pool with all the attendant facilities, organized a club and collected membership fees from those who desired to join. The amount of the membership fee will be refunded if the minimum number of members required is not reached within six months. In addition to the membership fee, each member agreed to pay yearly dues of $75. Under the contract, should any member become and remain delinquent in the payment of dues for 30 days or more, the operator will deduct the amount of such dues from the membership fee. Should any deliquency continue for 60 days or more the membership will be canceled. Except for the amount of a membership fee retained on account of a delinquency in dues, the full amount of such fee is required to be refunded to each member within five years after the pool is put into use. Terms and new conditions of membership will then be agreed upon.

Held, the amount of membership fees contributed by members of the swimming club under the terms of the contract is in the nature of a loan to the extent that the owner has a continuing obligation to refund such fees. However, any amount by which such obligation is redued to cure a delinquency in membership dues constitutes gross income to him derived from his business.