Bob Jones University Museum and Gallery, Inc. - Page 10

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          there is no doubt that petitioner is a bona fide museum that                
          furthers educational purposes.                                              
          II.  Private Benefit Factors                                                
               We now turn our attention to the specific factors cited by             
          respondent as the basis for her final adverse determination.                
               A.  Petitioner’s Payment of Rent to the University                     
               Respondent contends that petitioner’s payment of rent to the           
          University confers on the University an impermissible private               
          benefit.  Respondent states:                                                
                    This [fundraising by the museum] will result in                   
               direct economic benefit to Bob Jones University because                
               tax-deductible contributions made to Petitioner will be                
               used to reimburse Bob Jones University for rental of                   
               the building on the University campus where the art                    
               collection is housed.  This will relieve Bob Jones                     
               University of the cost of operating the museum itself,                 
               and will allow Bob Jones University to have the benefit                
               of the museum on its campus financed by tax-deductible                 
               contributions.                                                         
               The principal inquiry in determining whether rental                    
          arrangements create private benefit or inurement is whether the             
          rental payments are excessive.  See B.H.W. Anesthesia Found. v.             
          Commissioner, 72 T.C. 681, 686 (1979) (focusing on “whether                 
          comparable services would cost as much if obtained from an                  
          outside source in an arm’s-length transaction”).  In the present            
          case, petitioner is to pay the University $105,600 per year,                
          which is substantially less than the Building's fair market                 
          value.  Respondent contends that payments for less than fair                
          market value can create private inurement.  For support,                    





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