6
Petitioners filed Forms 990, Returns of Organization Exempt
from Income Tax, for the years in issue. ACADA and WSA reported
using the cash receipts and disbursements method of accounting,
and FSEP reported using the accrual method of accounting. On
Form 990 filed for the tax year 1989, WSA reported proceeds from
dauber sales in the amount of $29,449.11 and from cafeteria sales
in the amount of $6,193.99, in addition to proceeds from bingo
games.
Petitioners did not file Forms 990T, Exempt Organization
Business Income Tax Returns, during the years in issue. In the
notices of deficiencies, respondent determined that petitioners
were liable for tax on UBTI with respect to petitioners' "instant
bingo" activities. Respondent allowed deductions for prizes paid
and expenses paid related to petitioners' "instant bingo"
activities in computing petitioners' UBTI. Respondent did not
allow any deductions for amounts expended or contributed by
petitioners for charitable purposes.
The parties agree that the receipts generated by
petitioners' "instant bingo" activities constitute UBTI under
section 511(a). See Julius M. Israel Lodge of B'nai B'rith No.
2113 v. Commissioner, T.C. Memo. 1995-439, affd. 98 F.3d 190 (5th
Cir. 1996). Respondent concedes that petitioners are entitled to
deductions under sections 162(a) and 512(a) in computing their
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