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§ 3.1 MEANING OF GIFTbeing in “stark contrast” to the agency’s stance as articulated in a revenue ruling;203 the court ruled that the IRS was bound by its ruling, which the court characterizedas a “concession.” 204The import of this body of law is not a particular concern for donee charitableorganizations. They receive the contributed items and can treat them as gifts.The matter, however, essentially goes to the question of deductibility of thetransfers (or the extent of deductibility) and whether the transferor must recognizeincome or capital gain as the result of the transaction.(h) Credit Card Rebate PlansUsers of certain types of credit cards make a deductible charitable contributionwhen a percentage of the price of items (less an administration fee) purchasedwith the card at participating retailers is transferred to a charitable organizationselected by the cardholder. 205 (This is one of the few instances in which a deductiblecharitable gift can be made with funds that are not taxable as income.)A company sponsors a series of credit and debit cards that are identifiedwith the company’s name. These cards are issued to cardholders throughout thecountry by banks that have entered into license agreements with the company;the banks may charge an annual fee to the cardholders. The company negotiatesagreements with retailers, pursuant to which a percentage of the purchase priceis transferred to the company when one of these cards is used to purchase anitem from a participating retailer. When they first receive their company cards,and periodically thereafter, cardholders receive a list of participating retailers.They also are informed of the percentage of the retail purchase price that eachparticipating retailer will pay to the company. After a sale by a participatingretailer to a cardholder, the agreed-upon percentage of the purchase price istransferred to the company by the bank (or its agent) that processes the transaction.Of this amount, an administration fee—approximately 20 percent—isretained by the company.The balance of the amount transferred to the company is placed in a custodialaccount maintained by the company on behalf of each cardholder; theseamounts are considered to be rebates. When they apply for one of these cards,applicants are asked to designate a charitable organization to which they wantto have their rebates paid. Cardholders are free to change the designation at anytime by notifying the company. Rebates earned appear as a line item on the cardholders’monthly statements from the issuing banks. If the cardholder returns tothe retailer an item of merchandise purchased with one of these cards, theamount of the corresponding rebate is deducted from the rebate amount held inthe cardholder’s custodial account. At the end of each calendar quarter, the companytransfers rebates that have accumulated in the various custodial accounts203 Rev. Rul. 78-197, 1978-1 C.B. 83. See § 4.8, note 67.204 Rauenhorst v. Commissioner, 119 T.C. 157, 173 (2002). The court used the occasion of this opinion to notethat although the “general principles underlying the assignment of income doctrine are well established,” the“precise contours of the anticipatory assignment of income doctrine in the context of charitable contributionsof appreciated property have been the subject of some contention.” Id. at 163, 164.205 See, e.g., Priv. Ltr. Rul. 9623035. 87