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Additionally, we conclude that petitioner could control
BWE's and McKnight's activities. The agreements provided:
[petitioner] shall have the right to inspect any field
offices or other offices from which the solicitation
program is taking place without prior notice and at any
time so as to determine whether or not * * * [BWE or
McKnight] is fulfilling its obligations under this
AGREEMENT.
Petitioner reserved the right "to exempt at any time any
subscriber or any prospective subscriber or advertiser for any
reason whatsoever." BWE or McKnight had a duty to provide each
Monday a copy of the daily reports for the previous week of all
collected funds. Accordingly, we conclude that petitioner could
and did control BWE's and McKnight's activities. In the instant
case, we are convinced that neither the compensation structure,
which shifted part of the risk of loss to BWE and McKnight, nor
the presence of the indemnification clause in favor of petitioner
negates the agency relationship. Accordingly, we conclude that
petitioner had an agency relationship with BWE and with McKnight,
and that BWE's and McKnight's activities, as well as those of
their subcontractors, are to be attributed to petitioner for
purposes of determining whether petitioner's trade or business of
soliciting, selling, and publishing advertising space was
"regularly carried on" within the meaning of section 512.5
5 Compare Fraternal Order of Police v. Commissioner, 87 T.C.
747 (1986), affd. 883 F.2d 717 (7th Cir. 1987), where an exempt
organization, having contracted with another entity to publish a
(continued...)
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