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The issue for decision is whether petitioner's income from
an affinity credit card program is a royalty excluded by section
512(b)(2) from the tax on unrelated business income. We hold
that it is.
Section references are to the Internal Revenue Code in
effect for the years in issue. Rule references are to the Tax
Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
A. Petitioner
Petitioner, Alumni Association of the University of Oregon,
Inc., is an Oregon nonprofit corporation exempt from Federal
income tax under section 501(c)(3). Petitioner's principal place
of business is Eugene, Oregon. Petitioner was established to
advance the cause of higher education, promote the interests and
increase the usefulness of the University of Oregon, and
encourage good fellowship of its members to further its purposes.
Petitioner fulfilled its purposes by communicating with alumni
and sponsoring continuing educational activities and social
events. During the years at issue, petitioner had a staff of 12
or 13 employees.
B. History of the University of Oregon Alumni Association
Affinity Credit Card Program
In 1986 and 1987, petitioner became aware of affinity
credit card programs through news articles and discussions with
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