John W. Madden, Jr., et al. - Page 13

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          each must be present for income to be UBTI.  Here, we shall focus           
          our attention on the third element; namely, whether the leasing             
          of museum spaces was substantially related to the Museum's exempt           
          purpose.                                                                    
               An activity is substantially related to an organization's              
          exempt purposes where the performance of the activity has a                 
          substantial causal relationship to the achievement of the exempt            
          purposes.  Sec. 1.513-1(d)(2), Income Tax Regs.  The activity               
          must contribute importantly to the accomplishment of those pur-             
          poses.  Id.  This determination is based upon all of the facts              
          and circumstances surrounding the activity.  Id.                            
               In evaluating the substantial relationship, we focus our               
          inquiry on the manner in which the Museum conducts its activi-              
          ties.  United States v. American College of Physicians, 475 U.S.            
          834, 848-849 (1986).  Specifically, we will determine whether the           
          manner in which the Museum leased the building spaces to the                
          public manifests an intent to further its exempt purposes or                
          whether that manner indicates an intent to merely raise revenue.            
          National League of Postmasters of the United States  v. Commis-             
          sioner, T.C. Memo. 1995-205, affd. 86 F.3d 59 (4th Cir. 1996).              
          We begin by noting that the amount of revenue involved for each             
          year is not significant.  More importantly, the revenues earned             
          by the Museum from this activity barely exceeded the related                
          expenses, and in some years the Museum actually suffered losses.            
          This fact lends credence to the Museum's argument that the                  




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