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activities serving private commercial purposes, and operation for
the private benefit of W&H--are meaningfully different
requirements, at least in the context of the instant case.
We consider first the issue of inurement.
In order for an organization to qualify for exemption under
section 501(c)(3), no part of the organization’s net earnings may
inure to the benefit of any private shareholder or individual.
Sec. 501(c)(3); sec. 1.501(c)(3)-1(c)(2), Income Tax Regs.
A “private shareholder or individual” is broadly defined as
any person having a personal and private interest in the
activities of the organization. Sec. 1.501(a)-1(c), Income Tax
Regs. Such private shareholders or individuals are sometimes
referred to for convenience as “insiders”. See American Campaign
Academy v. Commissioner, 92 T.C. at 1066; Sound Health
Association v. Commissioner, 71 T.C. 158, 185-186 (1978).
We consider first whether W&H was an insider with respect to
petitioner, and then whether there was an inurement of
petitioner’s net earnings to W&H.25
A. W&H As Insider
25 Petitioner does not make the argument that W&H cannot
be an insider under the statutory language because W&H is not a
shareholder in petitioner and is not an individual. Accordingly,
we do not consider that question. See Estate of Fusz v.
Commissioner, 46 T.C. 214, 215 n.2 (1966). In any event, sec.
501(c)(3) deals with whether there is an inurement “to the
benefit of any * * * individual”. If there were an inurement to
W&H, then it may well be that any such inurement would be “to the
benefit of” W&H’s owners--the individuals Watson and Hughey.
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