The Board of Trade of the City of Chicago and Subsidiaries - Page 32

                                       - 32 -                                         

          specific portion of fees would be set aside for capital                     
          improvements, and all income and receipts were commingled.  The             
          court stated that “the amount or proportion to be used for                  
          capital improvements must be stated at the time of ‘assessment’             
          and earmarked for that purpose at the time of receipt.”                     
               In Maryland Country Club, Inc. v. United States, 75-2 USTC             
          par. 16,190 (D. Md. 1975), judgment revd. 539 F.2d 345 (4th Cir.            
          1976), the court, after examining the above- cited cases19,                 
          concluded that there were three basic conditions of earmarking:             
          First, there must be a definite commitment to engage in some                
          capital construction; second, at the time of the initial payment,           
          both the club and the member must be operating under the                    


          19  In addition to the above-cited cases, the court also                    
          examined Cactus Heights Country Club v. United States, 280                  
          F.Supp. 534 (D.S.D. 1967)(holding that a resolution, prior to               
          collection of the funds, to apply 80 percent of the funds                   
          collected to capital improvements was sufficient to bring that 80           
          percent within the exception), and Pinehurst Country Club v.                
          United States, 248 F.Supp 690, 692-693 (D. Colo. 1965).  The                
          court said that Pinehurst was probably at the clearly qualified             
          end of the scale of acceptable earmarking, stating that,                    
          “Although earmarking was not in question in that case, the                  
          earmarking which did occur and which was plainly acceptable                 
          serves as a useful example in other cases.”  Maryland Country               
          Club, Inc. v. United States, 75-2 USTC par. 16,190, at 88,952 (D.           
          Md. 1975), judgment revd. 539 F.2d 345 (4th Cir. 1976).  In                 
          Pinehurst the new members, in addition to paying dues, had an               
          option of paying an assessment for capital improvements and                 
          construction in cash or in installments.  The amounts paid as               
          capital contributions were accounted for separately and deposited           
          in a separate escrow bank account, and thereafter were                      
          transferred directly from the escrow account to a construction              
          account at which time members who had paid construction                     
          assessments were credited with the amounts not used.                        




Page:  Previous  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  Next

Last modified: May 25, 2011