Dharma Enterprises - Page 3

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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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Last modified: May 25, 2011