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taxable year ended October 31, 1986. The remaining 4.8 acres
were subdivided into 14 homesites. During petitioner's taxable
year ended October 31, 1987, 11 of the 14 homesites were sold to
petitioner's members for a total of $149,000. Petitioner's tax
basis and development costs for the 11 homesites sold totaled
$5,742 and $21,190, respectively, leaving petitioner with a gain
of $122,068. Petitioner used the proceeds from the sale of the
11 homesites to pay for the construction of the new recreational
facilities during the period beginning 1 year before and ending 3
years after the sale of the 11 homesites.3
Although petitioner originally intended that the entire
63.8-acre tract would be used for the development of new
recreational facilities (following the expiration of the 5-year
restriction period), petitioner never used any part of the 4.8-
acre tract for recreational activities. On the other hand, the
new recreational facilities constructed on the 59-acre tract have
been used by petitioner directly in the performance of its exempt
function.
Although petitioner filed a Form 990 (Return of Organization
Exempt from Income Tax) for its taxable year ended October 31,
1987, petitioner did not file a Form 990-T (Exempt Organization
3At the time this case was submitted, the three remaining
homesites remained unsold.
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