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provided in paragraphs (6), (10), (11), and (12) of
subsection (b). * * *
(B) Exempt Function Income.--For purposes of
subparagraph (A), the term "exempt function income"
means the gross income from dues, fees, charges, or
similar amounts paid by members of the organization as
consideration for providing such members or their
dependents or guests goods, facilities, or services in
furtherance of the purposes constituting the basis for
the exemption of the organization to which such income
is paid. * * *
* * * * * * *
(D) Nonrecognition of Gain.--If property used
directly in the performance of the exempt function of
an organization described in paragraph (7) * * * of
section 501(c) is sold by such organization, and within
a period beginning 1 year before the date of such sale,
and ending 3 years after such date, other property is
purchased and used by such organization directly in the
performance of its exempt function, gain (if any) from
such sale shall be recognized only to the extent that
such organization's sales price of the old property
exceeds the organization's cost of purchasing the other
property. * * *
For purposes of the present case, section 512(a)(3) can be
summarized as providing that an organization described in section
501(c)(7) generally is subject to unrelated business income tax
with respect to its gross income except: (1) Exempt function
income; and (2) gains that, while realized, need not be
recognized by virtue of section 512(a)(3)(D). The dispute in the
instant case centers on section 512(a)(3)(D).
Respondent determined that petitioner is subject to
unrelated business income tax in respect of the gain realized on
the sale of the 11 homesites. In particular, respondent
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