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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