- 6 -
status, petitioner may nevertheless be subject to tax with
respect to business income that is not related to its exempt
function. Sec. 501(b). In particular, section 511(a)(2)(A)
provides that an organization described in section 501(c) that is
exempt from taxation under section 501(a) may be subject to the
imposition of a tax computed as provided in section 11 for each
taxable year in which such organization earns unrelated business
taxable income as defined in section 512.
Section 512(a)(3) sets forth special rules regarding the
application of the unrelated business income tax to certain
organizations described in section 501(c). Section 512(a)(3)
provides in pertinent part:
(3) Special Rules Applicable To Organizations
Described In Paragraph (7), (9), (17), or (20) of
Section 501(c).--
(A) General Rule.--In the case of an
organization described in paragraph (7) * * * of
section 501(c), the term "unrelated business taxable
income" means the gross income (excluding any exempt
function income), less the deductions allowed by this
chapter which are directly connected with the
production of the gross income (excluding exempt
function income), both computed with the modifications
4(...continued)
(c) List of Exempt Organizations.--The following
organizations are referred to in subsection (a):
* * * * * * *
(7) Clubs organized for pleasure, recreation, and other
nonprofitable purposes, substantially all of the activities of
which are for such purposes and no part of the net earnings of
which inures to the benefit of any private shareholder.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011