- 37 -
Over 35 percent of petitioner's members do not trade on
petitioner's exchange, but instead hold their interests for
investment. The majority of these members lease their trading
privileges to others, but approximately 16 percent of the members
neither use their trading privileges nor lease them to third
parties, apparently expecting to realize a profit on the ultimate
disposition of their memberships.
The transfer fees are used to amortize the debt on a
revenue-raising asset, the CBOT building. Petitioner leases 80
to 85 percent of the space in the CBOT building to third parties.
The leases generate substantial rental income to petitioner. The
CBOT building also houses the trading floor, which generates
transaction fees, petitioner’s primary source of revenue. It is
clear that members’ payments of assessments to finance initial
construction of those assets would have been contributions to
capital because they would have increased the members’ equity in
23(...continued)
interests. Some of the members’ interests in the cases discussed
above, even those allowing capital contribution treatment, were
subject to such a restriction. Cf. Concord Village, Inc. v.
Commissioner, 65 T.C. 142 (1975); United Grocers, Ltd. v. United
States, 308 F.2d 634 (9th Cir. 1962); Washington Athletic Club v.
United States, 614 F.2d 670 (9th Cir. 1980); Affiliated
Government Employees Distrib. Co. v. Commissioner, 37 T.C. 909
(1962), affd. 322 F.2d 872 (9th Cir. 1963); Oakland Hills Country
Club v. Commissioner, 74 T.C. 35 (1980). The restriction on the
amount of profit a member can make from his transfer of an
interest attenuates the members’ financial interest in the equity
of the organization. There is no such restriction in the case at
hand.
Page: Previous 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 NextLast modified: May 25, 2011