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that it is not exempt from income tax under section 501(a).
Specifically, the Commissioner determined that petitioner failed
to establish that it operated exclusively for exempt purposes
under section 501(c)(3). This case is before us on a petition
for declaratory judgment pursuant to section 7428. The parties
filed a joint stipulation as to the completeness and correctness
of the administrative record and submitted this case for
determination under Rule 122.
Kristine Hurd and James Gould are the sole owners of KJ's
Place, a lounge where alcoholic beverages are served. The term
KJ is obviously derived from the first initials of the first
names of the owners, Kristine and James. In 1992, Kristine and
James created petitioner, KJ's Fund Raisers, Inc. They had
petitioner incorporated as a Vermont Non-Profit Corporation on
October 12, 1992. They also had petitioner file a Form 1023,
Application for Recognition of Exemption Under Section 501(c)(3)
of the Internal Revenue Code on November 11, 1992.
Petitioner's business is selling Lucky 7 or other break-open
(or lottery or rip) tickets. The lottery tickets are sold
exclusively at KJ's Place; no other locations were considered.
The tickets are sold during regular business hours by the owners
and employees of KJ's Place.
Petitioner was organized purportedly to "raise funds for
distribution to charitable causes". Petitioner expects the
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