KJ's Fund Raisers, Inc. - Page 7

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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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