Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 57-7

1957-1 C.B. 435

Sec. 6041

Caution:Amplified by Rev. Rul. 92-49

IRS Headnote

An agreement under which a corporation places coin-operated amusement or gaming devices on premises occupied by another, in consideration of a stipulated percentage of the gross receipts less specified expenses as remuneration for permitting the machines to occupy space on such premises, constitutes a lease of such space by the occupant as lessor to the corporation as lessee. If the remuneration paid by the corporation to the occupant of the premises (if other than a corporation) in any taxable year amounts to $600 or more the corporation is required, under section 6041 of the Internal Revenue Code of 1954, to file information returns on Forms 1096 and 1099 with respect to such remuneration.

Full Text

Rev. Rul. 57-7

Advice has been requested as to the nature, for Federal tax purposes, of the agreements hereinafter described, under which a corporation places coin-operated amusement and gaming devices on premises occupied by another.

M corporation owns slot machines, juke boxes, and pinball machines, as well as other amusement and gaming devices which are placed in various locations with the permission of the occupant of the premises. The parties agree that the occupant will receive a stipulated percentage of the receipts from the machines, after deduction of certain expenses, as remuneration for permitting the machines to occupy space in his establishment. Although the machines are owned by M corporation, the tax stamps are properly purchased by the occupant of the premises in his own name and he is reimbursed therefor by M corporation.

The machines can be opened only by a collector employed by M corporation who counts the money, usually in the presence of the occupant of the premises or one of his employees. The collector reimburses the occupant as to any payouts and then pays him the agreed percentage of the balance. Under the agreement between the parties, the occupant of the premises on which the machines are located is to make change for customers, if necessary, and to pay out any prizes or winnings. It is further understood by the parties that M is to pay the costs of repairing and installing the machines as well as all other expenses with respect thereto, and that M is to bear the losses from the operation of the machine, if any.

In view of the foregoing, these arrangements for Federal tax purposes constitute leases of space for the location of the machines entered into by M corporation, as lessee, with the occupants of the premises where the machines are placed, as lessors. If the remuneration paid by the corporation to the occupant of the premises (if other than a corporation) in any taxable year amounts to $600 or more, the corporation is required, under section 6041 of the Internal Revenue Code of 1954, to file information returns on Forms 1096 and 1099 with respect to such remuneration.