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Held: The fees received by P pursuant to its
service contract with L were substantially related to
its tax-exempt purpose and, therefore, did not
constitute unrelated business taxable income.
Held, further: P’s fulfillment of the
nonsponsorship and noncompetition clause did not
constitute a trade or business as defined by sec. 513,
I.R.C.; therefore, the payment did not constitute
unrelated business taxable income taxable to P under
sec. 511(a), I.R.C.
James R. King, Michael Dubetz, Jr., and Todd S. Swatsler,
for petitioner.
Robert D. Kaiser, for respondent.
RUWE, Judge: Respondent determined deficiencies in
petitioner’s Federal income tax in the amounts of $1,107,505 and
$40,192 for the taxable periods ending August 31, 1985, and
August 31, 1986, respectively.
After concessions, the issues for decision are: (1) Whether
the $292,617 received by petitioner pursuant to its service
contract with Landmark, Inc., during the taxable year ending
August 31, 1985, constituted unrelated business taxable income;
(2) whether a lump-sum payment made by Landmark, Inc., to
petitioner pursuant to the terms of a nonsponsorship and
noncompetition clause contained in their 1985 termination
agreement constituted unrelated business taxable income; and (3)
whether interest should be computed under the provisions of
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