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college scholarships. It planned to raise money through the
operation of bingo games held at the Pastime Lounge, a lounge
owned by two members of the board of directors. The other board
members consisted of an accountant and director of the lounge and
two "bingo players." The board was self-perpetuating, with the
existing directors selecting future directors. Id. at 197.
The owners of the Pastime Lounge ran the bingo games during
regular business hours. Employees of the Pastime Lounge
solicited orders for food and drink from the bingo players.
However, the accounts of the Pastime Lounge were kept separate
and distinct from those of the taxpayer. Id. at 197-198.
This Court held that the taxpayer had a nonexempt purpose
which was "substantial in nature"; i.e., to promote business at
the Pastime Lounge through the medium of the bingo games. Id. at
199-200. The Court based this conclusion in part on the identity
of the taxpayer's board of directors with the owners and
associates of the Pastime Lounge. Since the owners controlled
the board and appointed its future directors, the Court reasoned,
the taxpayer's activities could be used to the advantage of the
Lounge. Id. at 200.
The taxpayer argued that the separate accounts and the fact
that the Lounge received nothing from the taxpayer for wages or
rent demonstrated that it was operated exclusively for an exempt
purpose. The Court held otherwise:
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Last modified: May 25, 2011