Variety Club Tent No. 6 Charities, Inc. - Page 3

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                         Year1          Deficiency                                    
                         1984           $17,957                                       
                         1985           19,719                                        
                         1986      3,818                                              
          1  Taxable years ending September 30 of each of the years in                
          issue.  References in this opinion to petitioner’s fiscal years             
          are to years ending on September 30 of the indicated years.                 
               After concessions1 the issues for decision are as follows:             
                    (1) Whether any part of petitioner’s net earnings                 
               inured to the benefit of private shareholders or                       
               individuals, within the meaning of section 501(c)(3).2                 




               1    Petitioner does not dispute the correctness of                    
          respondent’s notice of deficiency calculations of the deficiency            
          for any year as to which we hold petitioner was not tax-exempt.             
               At trial, respondent contended that petitioner was not                 
          exempt because petitioner failed the statutory inurement test and           
          also because petitioner failed the test of sec. 1.501(c)(3)-                
          1(c)(2), Income Tax Regs., to the effect that an organization is            
          not operated exclusively for one or more exempt purposes if its             
          net earnings inure in whole or in part to the benefit of private            
          shareholders or individuals.  On opening brief, respondent notes            
          the overlap between the two contentions and states that its                 
          argument “is confined to private inurement.”  Thereafter,                   
          respondent deals only with the statutory inurement test.  We                
          treat this as respondent’s abandonment of the regulatory                    
          operational test.                                                           
               2    Unless indicated otherwise, all section references are            
          to sections of the Internal Revenue Code of 1954 or the Internal            
          Revenue Code of 1986 as in effect for the period of time referred           
          to.                                                                         




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