Rev. Rul. 66-314

A mortgage company employing the accrual method of accounting for Federal income tax purposes is in the business of servicing mortgages owned by others pursuant to a general contract with each owner which provides for monthly commissions as services are performed. The mortgage company also originates or purchases mortgages which it sells to investors for cash, simultaneously entering into contracts with such investors whereby it retains the right to service the mortgage.

Held , under the circumstances, the right to service the mortgages is not an amount realized in connection with the sale of the mortgages for purposes of determining gain or loss under section 1001(b) of the Internal Revenue Code of 1954.