This is a petition for review of a decision of the Tax Court ( 37 T.C. 909 ) and involves tax deficiencies determined and assessed by respondent against Affiliated Government Employees’ Distributing Company (hereafter petitioner) for its taxable years ended June 30, 1956, and June 30, 1957. We have jurisdiction under sections 7482 and 7483 of the Internal Revenue Code to review the decision of the Tax Court.

Petitioner operates a group of department stores in the San Francisco Bay area for the exclusive use of its members and guests. The issue before the Tax Court was whether the membership fees paid to petitioner could be considered exempt from taxation either as contributions to capital under section 118 of the Internal Revenue Code of 1954 or as money received in exchange for stock under section 1032 of the Code. Petitioner now concedes that the fees could not be considered contributions to capital, but contends that the Tax Court erred in failing to find that the fees were paid in exchange for stock.

The facts are not in dispute and for the purpose of this opinion we will adopt the following findings of the Tax Court:

During the years in question, petitioner leased the premises in which its business was carried on.

The Tax Court concluded that the membership fees “were plainly of a type of receipt that is normally regarded as income” and then considered whether the fees fell within the exclusionary provisions of section 118 of the Code (relating to contributions to capital) or section 1032 (relating to a corporation’s receipt of money or property in exchange for its stock). The Court held that the fees “were paid predominantly for the privilege of shopping at petitioner’s stores and using its facilities” and as such were not exempt under either statute. As noted earlier, petitioner now concedes that the fees would not be considered contributions to capital, but contends that the Tax Court erred in failing to hold that they were paid in exchange for stock. For the reasons to be discussed hereafter, we agree with the Tax Court.

Section 1032 of the Internal Revenue Code of 1954 provides in pertinent part as follows:

Although none of the prior revenue acts had contained a similar provision, it was clear even before the enactment of section 1032 that no gain or loss was realized by a corporation on the original sale of its stock. Difficulties arose, however, in determining whether gain or loss was realized by a corporation when it disposed of its treasury stock. To clarify the situation, section 1032 was enacted to provide for the non-recognition of gain or loss whenever a corporation receives money or property for its stock. Thus, generally speaking, Congress was only concerned with the problem of taxing gains or losses on treasury stock transactions and did not consider the problems which might arise in defining the term “stock.”

The term “stock” is not in fact specifically defined in the Code. Section 7701 (a) (7) does provide that the term “includes shares in an association, joint-stock company, or insurance company.” It would appear therefore that Congress chose to accept the ordinary connotations of the term and merely listed certain in terests which might not be considered “stock”, as it is normally defined. For the purpose of this opinion, we shall accept the following commonly given definition of stock quoted in petitioner’s brief: “* * * the interest or right

The fact that memberships in petitioner may, as a matter of form, fall within the purview of this definition does not, of course, control, since in applying the income tax laws we must regard matters of substance and not mere form.

Analysis of the substance of the relationship between petitioner and its members reveals to us that the fees in the instant case were not received by petitioner in exchange for its stock, but rather were received for the privilege of buying goods at a discount at petitioner’s stores. Although the memberships technically had some of the indicia of stock, i. e., the right to vote for the management and the right to share in the assets upon dissolution of the corporation, these facts must be considered in the following context: a merchant-customer relationship existed between petitioner and its members; the fee paid for the privilege of purchasing at the stores was small; members did not share in profits or potential growth of the corporation during its life; membership was not assignable and terminated at death; memberships were subject to revocation for any cause deemed sufficient; refunds of the fee either upon death or resignation were solely within the discretion of the Board of Directors; and no certificate of membership other than a wallet-sized card was issued. Neither does it appear that a conscientious effort was made to inform the members of their rights to vote and share in the assets of the corporation upon liquidation. The applicants were not told at the time of their applications that they had these rights and the rights were not listed on the membership cards. Even assuming that a substantial number of the members knew of their right to vote, we submit that on the basis of the facts outlined above it could not have been reasonably foreseen that the average member would have any desire to exercise the right; it is also difficult to believe, as stated by the Tax Court, “that the remote possibility of participating in any * * * distribution upon liquidation was a factor of any consequence in relation to the payment of the comparatively small fees here in issue.”

Further, as noted earlier, the Tax Court emphasized the fact that the fees “were paid predominantly for the privilege of shopping at petitioner’s stores and using its facilities.” Petitioner contends that motive or intent of the purchaser has no relevance to the determination whether “stock” has been purchased. If no question were raised as to the substance of the interests or rights which allegedly qualified the members as “stockholders,” we would be inclined to agree with petitioner. Here, however, we feel that the issue is whether the members received any interest of substance in the corporation other than the privilege to buy at discount. In resolving this issue, we feel that the Tax Court was justified in considering all of the circumstances surrounding the purchase of memberships, including the motives or purposes of the parties to the transaction. In the instant case, we cannot see how either the management or the applicants could realistically have considered the fees paid to have been “in exchange for stock.”

We do not hold here that memberships in non-stock corporations cannot fall within the purview of section 1032; nor do we hold that the absence of one or more of the normal indicia of stock considered above would preclude an exclusion under the statute. We merely hold on the facts of this case that the members received in exchange for their fees nothing of substance other than the privilege of buying goods at a discount, that their fees were thus paid solely for direct benefits to be received from petitioner and as such constituted taxable income to petitioner.

The judgment of the Tax Court is affirmed.

. Additional findings were znade by the Tax Court concerning the salaries paid to employees and officers of petitioner and the profit sharing trust which had been set up for them. . See Mertens, Law of Federal Income Taxation, Code Commentary, sec. 1032 for a detailed discussion of the legislative history and purpose of section 1032; see also Mertens, supra, volume 7, sec. 38.29. . See Weiss v. Steam, 265 U.S. 242, 254 , 44 S.Ct. 490 , 68 L.Ed. 1001 (1924). . Cf., Community T. V. Association of Havre v. United States, 203 F.Supp. 270 (D.C.Montana 1962). See also 16 Vanderbilt Law Review 458, 465 (1903), in which the position is taken that “[T]axation of the receipts from the sale of membership certificates will not appreciably affect discount selling, whereas a non-taxable status to these receipts will be an impetus to discount sellers to utilize comparable customer selection arrangements which offer them a windfall tax benefit.” . The record reveals that in the exercise of its discretion the Board has refunded a small number of membership fees. When such refunds are made it would seem appropriate that a tax adjustment be made. This problem, however, is not currently before us.