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from the travel program. Petitioner allocated 5 percent of
Wirth's salary and 50 percent of its secretary's salary to the
travel program during the years at issue.
H. Other Licensing Agreements and Proposals
Petitioner entered into an agreement with Wayneco
Enterprises, Inc. (Wayneco), on August 17, 1987. Wayneco agreed
to provide class rings and commemorative watches to alumni and to
pay petitioner $25 for each item purchased. Petitioner made no
salary allocation for this agreement.
Other organizations made proposals for similar programs to
petitioner. Petitioner rejected the solicitations because they
did not benefit petitioner's members or did not further
petitioner's purpose.
I. Petitioner's Income From the Affinity Credit Card Program
Petitioner grossed $254,252 for 1990 and $357,998 for 1991
from the affinity credit card program.
OPINION
A. Taxation of Unrelated Business Income
Section 511(a)(1) imposes a tax on the unrelated business
taxable income (UBTI) of certain tax-exempt organizations.
Petitioner is subject to tax on its unrelated business income
under section 511(a)(2)(A) because it is tax exempt under section
501(c). Income is UBTI if: (1) The income arises from a trade
or business; (2) the trade or business is regularly carried on;
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