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tax-exempt status. We conclude, and we have found, that the
compensation that W&H received under the Contract by way of
direct payment by petitioner and by way of the value of W&H’s use
of names generated by the fundraising efforts that petitioner
already paid for, exceeded reasonable compensation.
As a result, we conclude that, as of the June 11, 1984, date
on which the Contract started, the Contract was not a reasonable
contingent compensation arrangement, that W&H’s compensation
under the Contract exceeded reasonable compensation, and that
thus there was an inurement to an insider, in violation of the
restrictions in sections 501(c)(3) and 170(c)(2)(C).
It is suggested that the $2� million that petitioner cleared
during the course of the Contract may justify such high
compensation. However: (1) The $2� million is so small in
comparison to the amounts of contributions, of W&H compensation,
of postage and shipping costs, of printing and publications
costs, and of mailing list rental costs, as to be almost an
incidental product of the fundraising campaign; and (2) W&H was
supposed to provide a substantial asset to petitioner--a
housefile that petitioner could exploit in future fundraising
(see supra findings under Direct Mail Fundraising)--but W&H’s
services were a practical failure in this regard. Thus, the
magnitude of W&H’s compensation is not justified by adequacy of
results.
We hold for respondent on this issue.
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