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Deductions claimed by petitioner in 1989 and 1990 produced
net operating losses (NOL’s) of $55,918 and $26,854,
respectively, which petitioner carried forward to 1991.
Similarly, petitioner claimed deductions in 1992 that resulted in
an NOL of $4,957, and petitioner carried forward the NOL to 1993.
Respondent disallowed the deductions as in excess of fair market
royalties for the licensed assets. Petitioner reported taxable
income for the taxable years in issue of:
Year Taxable Income
1991 $200,338
1992 (4,957)
1993 115,160
Petitioner was incorporated in June 1987 as a nonprofit
mutual benefit corporation under the nonprofit mutual benefit
corporation law of the State of California. Cal. Corp. Code sec.
7110 (West 1990). It is a taxable subchapter C corporation for
Federal income tax purposes but has not issued any capital stock.
Petitioner's profits are to be used for a common purpose of its
members, who do not personally benefit from its profits.
Petitioner's articles of incorporation provide that petitioner
was formed "to contribute financially and in other ways to the
activities and welfare of non-profit organizations dedicated to
the transmission and preservation of the Buddha Dharma". Despite
petitioner's stated purpose, petitioner has not made a charitable
contribution to a Buddhist organization since its inception. A
secondary purpose of petitioner is to provide a work environment
in which to practice Buddhist principles.
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