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directors and the owners of KJ's Place, and petitioner's books
are kept separate from the accounts of KJ's Place.
From the proceeds of the sales of the lottery tickets,
petitioner has made grants to a variety of organizations. Some
of these grants have been memorialized in local newspapers. Of
six clippings sent to the IRS by petitioner, two have a photo of
Hurd or Gould in front of KJ's Place handing out a check on
behalf of petitioner. One clipping notes that KJ's Fund Raisers
is a new corporation located at KJ's Place. Another shows a
director of petitioner presenting a check and identifies the
proceeds as arising from rip-ticket sales at KJ's Place.
In its preliminary adverse determination letter, issued on
June 7, 1994, the IRS indicated that the identity of the lounge
owners and the officers of petitioner put Hurd and Gould in a
position to control petitioner. Petitioner responded as follows:
With respect to control of the organizations, it
may appear that all of KJ's Fundraisers, Inc.,
fundraising activities can be controlled by the owners
of the lounge due to the relationship between officers
and directors of each. It is our opinion, however,
that KJ's Fund Raisers, Inc. would fold without the
original founders of the organization as officers and
local charities would go unfunded. Therefore we do not
view the appointment of the present officers as a
function of control but more as a function of going
concern.
The IRS issued its final adverse determination letter on
February 27, 1996. It stated:
You have failed to establish that you are operated
exclusively for exempt purposes under section
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Last modified: May 25, 2011