Variety Club Tent No. 6 Charities, Inc. - Page 1

                                 T.C. Memo. 1997-575                                  

                               UNITED STATES TAX COURT                                

               VARIETY CLUB TENT NO. 6 CHARITIES, INC., Petitioner v.                 
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 9045-90.               Filed December 31, 1997.             

                    Petitioner was incorporated in 1970 to raise funds for            
               tax-exempt charitable organizations, primarily those                   
               benefiting underprivileged children.  Petitioner received a            
               favorable ruling letter in 1971.  Much of petitioner’s                 
               fundraising consisted of operating bingo games.                        
               Petitioner’s treasurer (Z) and a member (P) were delegated             
               to supervise and operate the bingo games, respectively.  Z             
               and P falsified records of the bingo games operations and              
               stole some of the proceeds.  In fiscal 1986 petitioner was             
               indicted for violation of Ohio statutes authorizing                    
               charities to conduct bingo games; petitioner paid an                   
               attorney to represent it and Z.  In fiscal 1987 local law              
               enforcement authorities brought a civil suit against                   
               petitioner, Z, P, and another, on account of these bingo               
               games; one attorney answered the complaint on behalf of all            
               the defendants.  In fiscal 1985 petitioner issued a $2,500             
               check to a tax-exempt charity for a specific project; the              
               charity decided not to engage in that project, endorsed the            
               check, and gave it to P; P then diverted the check instead             

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