3
under section 501(c)(12)(B)(i),1 thus resulting in petitioner's
classification as an exempt corporation under section 501(a).2
Petitioner is a Kansas rural telephone cooperative
corporation. It was formed in January 1953 to provide
telecommunication services to its members.
During 1991, 1992, and 1993, petitioner operated on a
cooperative basis to provide exchange and interexchange
telecommunications service to residences and businesses in its
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
2 Sec. 501 provides:
(a) Exemption From Taxation.--An organization described in
subsection (c) or (d) or section 401(a) shall be exempt from
taxation under this subtitle * * *
* * * * * * *
(c) List of Exempt Organizations.--The following
organizations are referred to in subsection (a):
* * * * * * *
(12)(A) * * * mutual or cooperative telephone companies
* * * but only if 85 percent or more of the income consists
of amounts collected from members for the sole purpose of
meeting losses and expenses.
(B) In the case of a mutual or cooperative
telephone company subparagraph (A) shall be
applied without taking into account any income
received or accrued--
(i) from a nonmember telephone
company, for the performance of
communication services which
involve members of the mutual or
cooperative telephone company,
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