Oregon State University Alumni Association, Inc. - Page 12

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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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