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better achieve the organizations’ exempt purpose. Hospital
Bureau of Standards & Supplies v. United States, supra (involving
a corporation that took over the purchasing of hospital supplies
in order to achieve volume discounts for its members); Council
for Bibliographic & Info. Technologies v. Commissioner, supra
(involving a corporation that took over operation and maintenance
of a computerized library research system enabling member
libraries to better perform their exempt functions). In the
present case, petitioners are superfluous corporate shells that
make no cognizable contribution to the education of residents.
Despite petitioners' incorporations, all funds continue to be
provided by the Schools and hospitals, and all program-related
decisions continue to be made through the Consortium. The
Schools and the hospitals continue to supervise and train the
residents and pay their salaries. In addition, the Consortium
continues to make the policy decisions, just as it has since
1983. The only change since the incorporation of petitioners is
that the money used to pay residents is funneled through
petitioners before it reaches the residents. As the
Consolidation Contract states, the Consortium has “overall
management and program control” with respect to the education of
residents. Petitioners are merely "corporations controlled by
* * * [the Consortium]." In substance, petitioners appear to be
appendages rather than integral parts.
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Last modified: May 25, 2011